Don't buy SHALEOIL THEME now, it is a risky investment
18 Dec, 201814 min read
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Shale Oil was among the worst performers today. It returned -3.36% to close at 552.362. It's recent 5 day performance has been -3.18%, -6.11%, -1.32%, +1.05% and -0.86%.
~SHALEOIL showed a strong down trend over the last 3 months. During this period ~SHALEOIL returned -40.23% and saw a maximum drawdown of -44.15%. There was a short signal during this period which returned +39.84%.
~SHALEOIL has been underperforming the SP500 index in recent time, after having outperformed till 27 Jan, 2017. ~SHALEOIL is currently at it's worst performance to the SP500 index and therefore does not make a good investment candidate. Over the last 1 year and 11 months, ~SHALEOIL underperformed the SP500 index on 50% days. Which indicates that on days ~SHALEOIL underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.
~SHALEOIL returned losses on 58% days in the last three months. During this time, it delivered on average -0.78% per day. It delivered it's worst daily return of -6.85%, during this period, on Wednesday, 24 Oct, 2018. There was initially a bullish trend during this period which started on 21 Sep, 2018 and went on till 25 Sep, 2018. The bullish trend returned +4.7% to investors. This was followed by a bearish trend that started on 4 Dec, 2018 and ended on 11 Dec, 2018. This bearish trend lost -15.63% of investor capital.
On monthly basis, ~SHALEOIL delivered profits and losses in equal number of months. ~SHALEOIL delivered profits less regularly than SP500 index. ~SHALEOIL was also a more risky investment than SP500 index as it's worst month in the last year, Dec 2018, returned -21.42% compared to -7.75% returned by SP500 index in Dec 2018. ~SHALEOIL had a shorter streak of profitable months than SP500 index. It only went up in 5 straight months during the last year. It is interesting to note that both ~SHALEOIL and SP500 index significantly outperform during months when quarterly/annual results are announced.
Risk comes from not knowing what you're doing.
-- Warren Buffett
~SHALEOIL 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 surge in ~SHALEOIL's volatility from 2 Oct, 2018 to 6 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that ~SHALEOIL has positive skewness in it's return distribution. This indicates that investors can expect ~SHALEOIL to make attempts to recover from drawdowns quickly. Which makes ~SHALEOIL a good candidate for momentum based trading on short-term bullish trends or counter-trends.
~SHALEOIL has more chance of extreme outcomes than the SP500 index. Therefore, ~SHALEOIL must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than ~SHALEOIL.
On a general note (since you are interested in ~SHALEOIL), two mid cap instruments that deserve special mention are ABMD and SQ. They have significantly outperformed the overall market.
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