India's Economic Analysis

In Equity Research we usually confine our analysis with Fundamentals of the stocks. Either we go in for Valuation techniques or much higher technical viewpoints of the Portfolio Theory (Markowitz, 1952). But in a slightly new addition to finance, we have “Financial Engineers” who believe that statistical and mathematical inference make much more sense that analyzing technical. Following are some of the basic figure that Financial Engineers rely on while establishing relationships between stocks and comparing stock movements with respect to indices. Standard Deviation of Portfolio This quantity measures the variability or volatility of a stock or portfolio (an individual’s or a fund) in relation to its average or mean. When we consider stocks historical figures we usually calculate its mean to analyze an average return over the last decade or so. The returns deviate from the average by this figure on either side. For short term investors, a higher value of standard deviation can