The party never started for YRD investors as it destroyed investor wealth
07 Dec, 201813 min read
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YIRENDAI LTD. (Foreign) ranked among the worst performers on Friday. It returned -5.0% to close at 14.62. On a day when the overall market breadth was 35%, it closed higher than 89% of the market. In comparison, the benchmark SP500 index closed today at -0.0233%.
Buy-and-Hold investors in YRD experienced a maximum drawdown of -26.09% over the last three months. It returned -18.28% during this strong 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.
YRD has been underperforming the SP500 index in recent time, after having outperformed till 18 Oct, 2017. Over the last 2 years 11 months and 3 days, YRD outperformed the SP500 index on 50% days. Which indicates that on days YRD outperforms the SP500 index, it's performance is marginally better than on the days it underperforms the SP500 index.
During the last three months YRD was mostly loss making and delivered on average -0.22% per day. It's best return during this period (of +11.63%) was on Thursday, 1 Nov, 2018. While it's worst loss in the same period (of -11.79%) was on Monday, 29 Oct, 2018. There was initially a bullish trend during this period which started on 12 Sep, 2018 and went on till 17 Sep, 2018. The bullish trend returned +5.11% to investors. This was followed by a bearish trend that started on 24 Sep, 2018 and ended on 2 Oct, 2018. This bearish trend lost -11.69% of investor capital.
On monthly basis, YRD delivered losses in more months over the last year, than profits. YRD delivered profits less regularly than SP500 index. YRD was also a more risky investment than SP500 index as it's worst month in the last year, May 2018, returned -33.48% compared to -7.28% returned by SP500 index in Oct 2018. YRD had a longer winning streak of losing months than SP500 index. It went down in 4 straight months (from Apr 2018 to Jul 2018) during which period it delivered -67.55%.
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YRD is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant fall in YRD's volatility from 13 Sep, 2018 to 24 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 10 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that YRD 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.
SP500 index has more chance of extreme outcomes than YRD. Therefore, SP500 must receive a lower allocation than YRD in your portfolio. SP500 index usually has shorter drawdown period than YRD.
On a general note (since you are interested in YRD), three instruments that have performed similar to YRD are OCN, DQ and IPI. They must all be evaluated as alternative investment options and for diversification.
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