When the stock market moves hills and valleys, the entire financial market perception moves.
The ups and downs when happening very frequently, we overestimate downside risk. This downside risk of loss builds enough fear to stay away from the stock.
But, not to deny there are financial gains attached to risky high movement stock.
Let’s understand and have a close look.
Volatility is simply a statistical measure that measures the range of returns for a given stock or market index.
It measures this deviation through a variance or standard deviation between returns.
A stock’s volatility is equal to the amount that particular stock will separate from the original price (which is also called a mean price) at which it was earlier traded. This can be thought of a pendulum.
The more the pendulum swings from its mean (original) position it is said to be more volatile. More the swings are ferocious, more is the volatility and vice versa.
When volatility is high, the dispersion will be wider and hence we get a wider price range. The opposite goes for a low volatility stock.
And thus the basic logic of trading and investing goes true: “the higher the risk, the better the returns will be”.
The best part of volatile stocks is that volatility can be measured and hence can be acted upon strategically to earn profits.
“Volatility is the friend” for active investors. The upside benefits are obvious and are comparatively high than a simple long position in a stock for a longer duration.
The actual question is when we are traveling in a bus, whether we want a bumpy ride full of hills and valleys or we want to straight smooth ride.
By nature, we are loss averse investors and even according to Prospect theory of behavioral finance we prefer certain gain over probable gain.
The derivatives and options market is also one of the ways where we could invest. In fact, most of the derivatives market heavily make money on volatility.
Having said about loss aversion, if we could time the market as the information available to us plenty and be an active investor, a small corpus of funds can be kept to earn huge profits.
Generally, these stocks are from mid-cap and small-cap segment as these segment stocks exhibit high price movements.
Sun Pharmaceutical Industries Limited is an India based multinational pharmaceutical company. The company manufactures pharmaceutical formulations and active pharmaceutical ingredients (APIs) and also sells these products primarily in India and the United States.
It has recently seen a price swing of the price of ₹680 to ₹400. The fall was due to some US non-approval of drugs and governance issue. This stock had also climbed ₹680 in a span of 3 months.
Suzlon Energy Ltd. is a wind turbine supplier based in Pune. This stock was once one of the picks by Rakesh Jhunjhunwala. Which was later discarded due to continuous losses the company posted on its books. The company is recovering and has recently posted a positive operating profit.
This recovering stage has given the stock huge price swings of almost 25% of the base price in the market.
Garden Silk Mills Ltd is one of the leaders in the Indian textile industry, with a specialty in Polyester Filament based textiles and yarns.
This stock has seen ups and downs of almost 16% of its current market price at a much frequent rate. The company has comparatively a small market capitalization of almost ₹90 crores.
Madhucon Projects Limited is one of India’s leading Engineering, Procurement and Construction (EPC) and Build, Operate and Transfer (BOT) Contractor, the company have executed wide-ranging projects in infrastructural projects in India.
The volatility of the stocks is 15% of the current market price.
The Company is into the business of manufacturing of sugar, distillery products and also in the generation of electricity. The Company has comparatively large sugar plant capacity and electricity generation capacity.
The fluctuation for the stock price was almost 15% of the current market price. The stock had 3 spikes in a year and max percentage change in upside movement was almost around 60%.
The Company operates in more than 50 countries across 4 continents. IP based software solutions and a wide range of IT services have enabled 3i Infotech to successfully streamlined business operations of customers globally.
The price volatility is 14% of the base market price. This stock had many peaks and valleys in a year.
This wing of GVK group deals with power and infrastructure projects throughout India. The power sector performance in this current year has been a prime reason for the stock volatility.
The company has a high volume of trade of getting executed due to the strength and capabilities of the company proven historically.
The price volatility of the stock has been 13% of the base market price. The long term effect on the stock price is a fall from the FY 18 ending price. But, there are plenty of pockets where the stock price rose and dropped, thus providing a huge opportunity for intraday trading.
Jubilant Industries Ltd. has a business in the area of Agricultural and Performance Polymers business. This company is under the parent Jubilant Bhartia group.
The price volatility of the stock was 13% of the base market price. The stock had a 37% gain in a single rush and then had a 50% drop.
Magma Fincorp is an Asset Finance Company operating in 22 states across India. It provides various financial solutions for financing vehicles and other agricultural related products and personal finance requirement.
The price volatility of the stock was almost 11% of the base market price. The 52 weeks high for this stock was ₹193. Whereas 52 weeks low was less than 50% of the high, ₹81. The stock showed a bull sign at the start of the financial year and then showed a mean reversal for bear case.
This is a management consulting company with expertise in engineering technology services in life science and supply chain. Take solution stock trades in good volume indicating acceptability by the market. The price volatility is around 19%.
The stock had a 52 week high of ₹308 and then it followed a bearish trend with small upsides in the way. Also, the stock has now seen a mean reversal towards bear recovery.
All the stocks discussed above exhibit high volatility, hence they are apt for trading in the very short term like intraday trade or trading days of 2-3 days.
These stocks are a top pick for futures and options investors.
Investing in these stocks can reap a large chunk of money but they have to be actively monitored. I would recommend a small technical analysis study for these stocks before investing.
These stocks act as the catalyst to corpus building, as a catalyst needs to act with care, otherwise, the chemical reaction can show disastrous results. The same is the condition with these stocks.
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.
|Mutual Fund Calculator|
|SIP Calculator||PPF Calculator||EMI Calculator|
|Lumpsum Calculator||PF Calculator||Car Loan EMI Calculator|
|Mutual Fund Return Calculator||Gratuity Calculator||Personal Loan EMI Calculator|
|SWP Calculator||HRA Calculator||Home Loan EMI Calculator|
|Sukanya Samriddhi Yojana Calculator||CAGR Calculator||SBI EMI Calculator|
|FD Calculator||GST Calculator||SBI Personal Loan EMI Calculator|
|RD Calculator||HDFC EMI Calculator||SBI Home Loan EMI Calculator|
|NPS Calculator||HDFC Personal Loan EMI Calculator||SBI PPF Calculator|
|Simple Interest Calculator||HDFC Home Loan EMI Calculator||SBI RD Calculator|
|Compound Interest Calculator||HDFC FD Calculator||SBI SIP Calculator|
|Interest Rate Calculator||HDFC RD Calculator||SBI FD Calculator|