ETR investors herd to book profits while the going is good
14 Dec, 201813 min read
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ENTERGY CORP is a falling knife that can bleed you if you catch it today. It lost -0.75% to close at 89.78. During the last week it returned +0.71% and saw a maximum drawdown of -0.76% before bouncing back.
Buy-and-Hold investors in ETR experienced a maximum drawdown of -6.31% over the last three months. It returned +6.35% during this 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 +4.36%.
ETR has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 10 days, ETR outperformed the SP500 index on 50% days. Which indicates that on days ETR outperforms the SP500 index, it's performance is marginally better than on the days it underperforms the SP500 index.
During the last three months ETR was mostly profitable and delivered on average +0.1% per day. It's best return during this period (of +2.72%) was on Wednesday, 24 Oct, 2018. While it's worst loss in the same period (of -2.42%) was on Wednesday, 19 Sep, 2018. There was initially a bearish trend during this period which started on 24 Sep, 2018 and went on till 26 Sep, 2018. The trend delivered -4.28% losses to investors. This was followed by a bullish trend that started on 4 Oct, 2018 and ended on 8 Oct, 2018. This bullish trend delivered +4.06% to investors.
ETR had 6 profitable and 6 loss making months over the last year. During the last year, ETR underperformed SP500 index on monthly return basis. ETR was also a less risky investment than SP500 index as it's worst month in the last year, Jan 2018, returned -4.73% compared to -7.28% returned by SP500 index in Oct 2018. ETR had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year. It is interesting to note that both ETR and SP500 index significantly outperform during months when quarterly/annual results are announced.
"I finally know what distinguishes man from the other beasts: financial worries.
ETR is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in ETR's volatility from 18 Sep, 2018 to 31 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that ETR has significant positive skewness in it's return distribution. This indicates that investors can expect ETR to recover from drawdowns quickly. Which makes ETR a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
ETR has more chance of extreme outcomes than the SP500 index. Therefore, ETR must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than ETR.
On a general note (since you are interested in ETR), if you are evaluating ETR as an investment candidate, then you should read about MVC which has delivered similar performance and can help diversify your portfolio.
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