140.17 -18.18 (-12.97%) Sell

SHOP investors disappointed by market underperformance

13 min read

SHOPIFY INC. (Foreign) was among the worst performers today. It returned -12.97% to close at 140.17. During the last week it returned -7.48% and saw a maximum drawdown of -12.97% before bouncing back.

[Themes containing SHOP]

Buy-and-Hold investors in SHOP experienced a maximum drawdown of -26.86% over the last three months. It returned -8.76% during this down trending period. There were both Long and Short signals during this period, where the short signals were significantly more profitable than the long signals.


SHOP has been underperforming the SP500 index in recent time, after having outperformed till 25 Jul, 2018. Over the last 2 years 11 months and 10 days, SHOP outperformed the SP500 index on 55% days.

During the last three months SHOP delivered profits on 55% days. However, it still managed to end this period in a loss. It's best return during this period (of +12.04%) was on Thursday, 25 Oct, 2018. While it's worst loss in the same period (of -12.97%) was on Friday, 14 Dec, 2018. There was initially a bullish trend during this period which started on 17 Sep, 2018 and went on till 20 Sep, 2018. The bullish trend returned +8.62% to investors. This was followed by a bearish trend that started on 4 Oct, 2018 and ended on 11 Oct, 2018. This bearish trend lost -21.5% of investor capital.

On monthly basis, SHOP delivered profits in more months over the last year, than losses. SHOP delivered profits less regularly than SP500 index. SHOP significantly outperformed SP500 index in Jan 2018, when it returned +21.26% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. SHOP had a shorter streak of profitable months than SP500 index. It only went up in 2 straight months during the last year.

"A bull market is very much like being in love. You don't realise its value till It's gone.

SHOP 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 SHOP's volatility from 1 Oct, 2018 to 22 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 SHOP 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.

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

SP500 index has more chance of extreme outcomes than SHOP. Therefore, SP500 must receive a lower allocation than SHOP in your portfolio. SP500 index usually has shorter drawdown period than SHOP.

On a general note (since you are interested in SHOP), if you are evaluating SHOP as an investment candidate, then you should read about QLYS which has delivered similar performance and can help diversify your portfolio.

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