RECLTD investors herd to book profits while the going is good

REC LIMITED significantly underperformed today. It lost -1.71% to close at 126.15. During the last week it gained +1.28% and saw a maximum drawdown of -1.71% before bouncing back.

[Themes containing RECLTD]

Buy-and-Hold investors in RECLTD experienced a maximum drawdown of -20.87% over the last three months. It gained +21.12% during this strong up trending period. There were both Long and Short signals during this period, while the long signals were significantly more profitable than the short signals. The net profit from Long signals was +9.09%.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

RECLTD has been outperforming the NIFTY-50 index in recent time. Over the last 3 years and 1 month, RECLTD outperformed the NIFTY-50 index on 48% days. Which indicates that on days RECLTD outperforms the NIFTY-50 index, it's performance is marginally better than on the days it underperforms the NIFTY-50 index.

RECLTD was profitable on 53% days in the last three months. During this time, it delivered on average +0.34% per day. It delivered it's worst daily return of -9.14%, during this period, on Wednesday, 28 Nov, 2018. There was initially a bearish trend during this period which started on 27 Nov, 2018 and went on till 30 Nov, 2018. The trend delivered -19.64% losses to investors. This was followed by a bullish trend that started on 24 Dec, 2018 and ended on 31 Dec, 2018. This bullish trend delivered +11.23% to investors.

RECLTD had 5 profitable and 7 loss making months over the last year. During the last year, number of profitable months of RECLTD and NIFTY-50 index were the same. RECLTD significantly outperformed NIFTY-50 index in Dec 2018, when it returned +22.27% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. RECLTD had a longer winning streak of losing months than NIFTY-50 index. It went down in 5 straight months (from Feb 2018 to Jun 2018) during which period it delivered -35.83%. It is interesting to note that both RECLTD and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

I think that stocks have been this tremendous, tremendous equalizer for people in this country. Guys who can't make a lot of money at their jobs have been able to make a lot of money in the stock market.
-- Jim Cramer

RECLTD is becoming less volatile overall. In comparison, the NIFTY-50 index is seeing a fall in volatility. During the last three months, there was a significant fall in RECLTD's volatility from 3 Dec, 2018 to 16 Jan, 2019. While there was a significant fall in the NIFTY-50 index's volatility from 31 Oct, 2018 to 5 Dec, 2018.

Advanced/professional short-term investors should note that RECLTD has significant negative skewness in it's return distribution. This indicates that RECLTD is very risky for short-term investment and can significantly underperform for long durations.

Investors trading in RECLTD derivatives at this moment can consider 'Long Strangle' options strategy to receive better risk-adjusted returns.

RECLTD has more chance of extreme outcomes than the NIFTY-50 index. Therefore, RECLTD must receive a lower allocation than NIFTY-50 in your portfolio. NIFTY-50 index usually has shorter drawdown period than RECLTD.

On a general note (since you are interested in RECLTD), two instruments that have been extremely volatile in recent times are SRIPIPES and ~HOMEAPPLIANCES. Investors in these instruments should consider reducing their exposure (to SRIPIPES and ~HOMEAPPLIANCES) and diversifying their portfolios.