SK Biswal Chief Engineer at ONGC. Interested in Stock option trading ,Technical Analysis of Stocks & Commodities

Callibration and Measurement of Power Rating of Stocks

1 min read

In any industry it is always critical to calibrate any equipment or measuring tools which are in application  of process.This is crucial to ensure efficiency and to achieve targeted output with advantages of leverage.This is part of strategy to continuously multiply productivity.This factor is enhancement of Alpha power of a system.Similar tools and concepts are applied to find the productivity of  stocks and to select portfolio so as to have enhanced alpha power.Enhancement is theoretically  achievable.

calibration

 

Momentum of a stock is indicative of the internal energy or force of its engine and therefore stands for its power rating.Momentum in statistical physics actually is different from acceleration in that it is the speed of object at a certain distance.Counteracting friction force is object of interest here unlike in acceleration where time is basis.However momentum is to be taken as working output per unit of time or time rate of work output /return being produced.Simple comparision can be made with CFL bulbs with different watts.If we have two CFL bulbs with different power rating i.e 25watts and 5 watts ,Their outputs on actual application are going to be  25X and  5X in terms of return which illumination or lighting. Well high power bulbs certainly going to give plenty of lighting as compared to low power bulb like 5watts which is quite disappointing and wastage.

CALCULATIONS OF POWER RATING OF STOCKS

1.Time rate of return= percentage of return per unit of time

This is Alpha of stock or Index and indicates the power output of the stock.

2.Relative rate of return =Alpha of the stock/Alpha of Index

This is Beta which indicate the X factor of the stock and its productivity or qualitative grade.

APPLICATION

This is how power rating of a stock is calibrated and measured before investment decision is taken.This measurements could be used for selection of stock for trading or selection of portfolio to achieve strategic objectives of higher efficiency and leverage. Clearly 25watt bulb is more preferable and going to be more sought after as compared to 5 watt bulbs.So investing in former makes more sense than the later.This approach should be part of strategy.In fact calibration is done using historical data so that maximum and minimum threshold value for alpha and beta can be obtained  in advance so as to make an informed plan.It is exactly done same way for calibration of Pressure gauges used in any industry.Then comes measurement which is continuous monitoring .We have to measure to control something.From statistical view ,these power coefficients such as alpha and beta can be obtained using and comparing volatility of the stock and the index based on which investment decisions can be made.This simple method helps us to understand and leverage our final output. 

SK Biswal Chief Engineer at ONGC. Interested in Stock option trading ,Technical Analysis of Stocks & Commodities

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2 Replies to “Callibration and Measurement of Power Rating of Stocks”

    1. Elder’s Force index and STO can be used as approximate measure of momentum to reflect the wattage of price action and for comparative study. They are good power indicators like Volatility of the stock to estimate potential returns.

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