Stock price variance

As of June 10, 2022: variance of daily price changes is rising slightly across all populations. This is important as it could indicate greater risk in holding equities without a commensurate increase in expected return. In fact, historical returns are down across all US equity indices we follow.

Our model looks at two US company populations: positive and negative net income.

First reading: the year ending May 16, 2022, adjusted closing price variance for the past year.
Third reading: year ending May 20, 2022. Variance has dropped in individual stocks (profitable or not), but has increased in the S&P 500 ETF.

View 1: Raw Variance

1. 2160 stocks with positive net income and positive cash flow from operations: 1.4 x 10-4. Current levels are slightly elevated but consistent with the past year.
May 17: 1.4 x 10-4
May 20: 1.4 x 10-4
May 31: 1.4   x 10-4
June 1 : 1.4 x 10-4
June 8:  1.4 x 10-4
June 10 1.5 x 10-4 (up a tick)
expected return 4.75%
2,013 tickers (dropped significantly)
Min & max expected return 0.01, 0.15 (rounded to 2 decimal places)
​

2. 813 stocks with negative net income: 4.2 x 10-4. Current levels are up ~10% over the past year.
May 17: 4.3 x 10-4
​May 20: 4.2 x 10-4
May 31: 4.2 x 10-4
June 1 : 4.2 x 10-4
June 8: 4.3 x 10-4 (it finally went up a tick)
June 10: 4.4 x 10-4 (up another tick)
Expected return: 6.24%
1,501 tickers (increased significantly)
Min & max expected return 0.0109, 0.1454



3. $SPY, or the S&P 500 Index ETF: 1.2 x 10-4. Current level is up > 10% over the past few weeks.
May 17: 1.2 x 10-4
​May 20: 1.3 x 10-4
May 31: 1.3 x 10-4
June 1 : 1.3 x 10-4
June 8:  1.3 x 10-4
June 10: 1.4 x 10-4 (up a tick)

Conclusion: The $SPY has the lowest price variance, then companies with positive net income, then companies with negative net income. In today's market, variances are rising. However, the SPY is increasing in variance while the overall groupings of stocks (highly diversified portfolios) are maintaining their variance levels.

​Assumptions: portfolios are evenly weighted, for 253 trading days, using adjusted closing stock prices.

What this data means to us is that regardless of market conditions, stocks of companies that are profitable (positive net income) and as of May 20, 2022 also have positive cash flow from operations have lower daily price variance than stocks of companies with negative net income.

R&D readout:

New: From May 16 to May 20 annual closing price variance increased for the S&P 500 Index ETF while it decreased for two large sets of individual stocks, held evenly.

The S&P 500 has become more volatile.https://t.co/5ADw2v5KMn pic.twitter.com/a2wEMRPBfT

— Chicago Quantum (@chicago_quantum) May 23, 2022