PAPER THEME shows sign of weakness as investors do cost averaging

Paper performed better than the broader market on Tuesday. It returned +0.43% to close at 2728.4. On a day when the overall market breadth was 71%, it closed higher than 80% of the market. In comparison, the benchmark NIFTY-50 index closed today at +0.19%.

[Theme constituents]

~PAPER is currently in a down trend. The previous short signal in ~PAPER has not been profitable for investors in general. If you are short on ~PAPER at current levels please make sure that your allocation is limited and that your portfolio is well diversified.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

~PAPER has been underperforming the NIFTY-50 index in recent time, after having outperformed till 10 Sep, 2018. Over the last 2 years and 12 months, ~PAPER outperformed the NIFTY-50 index on 49% days. Which indicates that on days ~PAPER outperforms the NIFTY-50 index, it's performance is marginally better than on the days it underperforms the NIFTY-50 index.

During the last three months ~PAPER was mostly loss making and delivered on average -0.1% per day. It's best return during this period (of +8.29%) was on Wednesday, 10 Oct, 2018. While it's worst loss in the same period (of -4.48%) was on Friday, 28 Sep, 2018. There was initially a bullish trend during this period which started on 12 Oct, 2018 and went on till 16 Oct, 2018. The bullish trend returned +6.36% to investors. This was followed by a bearish trend that started on 12 Nov, 2018 and ended on 16 Nov, 2018. This bearish trend lost -7.48% of investor capital.

On monthly basis, ~PAPER delivered losses in more months over the last year, than profits. ~PAPER delivered profits less regularly than NIFTY-50 index. ~PAPER significantly outperformed NIFTY-50 index in Aug 2018, when it returned +25.53% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. ~PAPER and NIFTY-50 index, both had periods of 2 consecutive profitable months. It is interesting to note that both ~PAPER and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

Some people dream of success, while other people get up every morning and make it happen.
-- Wayne Huizenga

~PAPER 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 surge in ~PAPER's volatility from 19 Sep, 2018 to 10 Oct, 2018. While there was a significant fall in the NIFTY-50 index's volatility from 21 Sep, 2018 to 5 Dec, 2018.

Advanced/professional short-term investors should note that ~PAPER has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

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

On a general note (since you are interested in ~PAPER), three instruments that deserve special mention are IGARASHI, HEG and MERCK. They have all outperformed the market and must be closely watched for investment opportunities.