NJ’S Low Volatility Factor

One of the main concerns of focusing on lower volatility stocks is that they can generate lower returns. Fortunately,

due to some unique structural aspects, this has not held true in the Indian context. After studying daily, weekly and monthly volatility over periods ranging from 1 year to 5 years and holding periods ranging from 3 months to 1 year, NJAMC follows a measure that provides the optimal mix of consistency and churn.

Measure that provides the Optimal Mix

The NJ Low Volatility 100 Portfolio, an equal-weighted portfolio of 100 stocks, is constructed by tilting the float-adjusted capitalisation - weighted Nifty 500 TRI, the investable portfolio, towards 100 constituents with the lowest volatility indicators over the period of analysis

  6M Volatility (%) 6M Beta  6M Semi Deviation (%)
NJ Low Volatility 100 Portfolio 14.75% 0.80 9.15%
Nifty 500 TRI 17.41% 1.00 11.25%
  • Source: Internal research, Bloomberg, National Stock Exchange
  • Factor parameters calculated as on 31st August 2022.
  • For Nifty 500 & NJ Low Volatility 100 Portfolio factor definitions are the average of its constituents.
  • Volatility is calculated using daily returns annualised
  • Beta is calculated as the covariances of the security with the market divided by the variance of the market.
  • Semi Deviation is defined as downside standard deviation annualised
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Low Volatility 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

 

NJ Low Volatility 100 Portfolio vs Nifty 500 TRI

  • Source : Internal research, Bloomberg, National Stock Exchange
  • 10-Yr CAGRs are calculated for the period 30 September 2002 to 31st August 2022 and have been rolled on a daily basis.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Low Volatility 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

Low Volatility Line Chart
The low volatility factor lives up to its promise of generating additional returns compared to the index with lower deviation and greater consistency.

 

NJ Low Volatility 100 Portfolio vs Nifty 500 - CAGR

  • Source : Internal research, Bloomberg, National Stock Exchange
  • CAGRs are calculated as the average CAGR based on the rolling CAGRs (rolled daily) calculated for the respective holding periods i.e. 1, 3, 5, and 10-Yr rolling CAGRs. The period for calculation is 30 September 2002 to 31 August 2022
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Low Volatility 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

NJ Low Volatility 100 Portfolio vs Nifty 500 - Return/Standard Deviation

  • Source: Internal research, Bloomberg, National Stock Exchange
  • The Return/Standard Deviation ratios have been calculated by dividing the respective rolling returns (rolled daily) by the standard deviation of the corresponding rolling returns, calculated over the period 30 September 2002 to 31 August 2022.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Low Volatility 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

  • Source: Internal research, Bloomberg, National Stock Exchange
  • The Drawdown for a specific date has been calculated by dividing that day’s NAV of NJ Low Volatility 100 Portfolio and Nifty 500 TRI by their peak NAVs up to that date, respectively.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Low Volatility 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.
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