COMPARING STOCKS IN GROUPS
The Reward~Risk Tradeoff plots compares groups of related stocks or ETFs on their respective X-Y coordinates of (1) upside percentage price change forecast potentials versus (2) prior experiences of price drawdowns. The more attractive (to buyers) issues are down and to the right, perhaps in the green area where upside forecasts are at least 5 times the drawdown experiences average, (a Reward to Risk Ratio exceeding 5:1).
The dotted diagonal line indicates where upside and downside potentials are equal. Investments above this line are "swimming upstream" against larger downside prospects than their upsides. Again, momentum stocks can often swim well.
Issues to the left of the vertical Y-axis scale are currently priced above their forecast price range, and those at the horizontal X-axis scale of zero have a perfect experience of nothing but higher prices following price range forecasts with upside-to-downside balances like the present one. Such pure bottom-tick forecasts are most unusual.
The positioning of the stocks in the plot tell a lot about how investors are valuing the group from the scatter and alignment of the group's members. Those with the least bad price drawdown experiences suggest a high degree of confidence may be warranted. Those groups with large proportions of their population above the diagonal suggest dangerously fully-priced conditions.
Aberrations may occur, particularly at extremes, due to data circumstances peculiar to a company's situation. It usually is best then to eliminate the stock from consideration of any action until a better understanding is achieved from other sources. Watch out for "distant foul balls."
This tradeoff plot is useful to quickly identify items of most interest in a group, but the ODDS and PAYOFFS histories in the data scorecard tables of the blue BTF-chart pages should provide more specific investment action guidance. Those scorecards offer data that can be compared between any investments, not just by pairs of stocks in the same business. Commonly assessed Risk and Return prospects are there, with a sense of scale and odds or probabilities for over 2500 stocks, ETFs, and indexes.