RiskMetrics Group has developed a new visualisation tool for mapping risk hot spots across the S&P index and Nasdaq 100 financial markets.
Arranged by market cap and stock price volatility, the Risk Map of the Market is color-coded to depict the different ranges of stock price volatility. The most volatile stocks appear as red boxes while the least volatile stocks are represented by blue boxes. Likewise, stocks with the largest market caps are arranged on the left-hand side of the chart, moving gradually to the right-hand side of the chart as market caps get smaller.
When a user scrolls his mouse over each box, he receives a risk synopsis of that stock, including its RiskGrade measure - scale of zero to 1000 of volatility; its Xloss, a measure of the amount an investor could potentially lose on a bad trading day based on an average of the stock's worst trading days; and the RiskImpact of that stock on the rest of the holdings in the index.
"Transparency is the key to building investor confidence," says Michael Thompson, RiskMetrics Group market strategist. "The Risk Map of the Market is the quickest way for investors to get a comprehensive picture of the risk of those stocks that make up their investment portfolios," he says.
The tool can be delivered as both a stand alone module and as part of RiskMetrics' new investment management platform, WealthBench.