This thread is rather about long term investing than short term trading...
Everybody is probably going to expect some stock with great financial figures and a strong uptrend.
Well, it does have decent figures but that is not what this is about.
We all know diversification raises your risk adjusted return.
A good diversifier is either uncorrelated or even negatively correlated to stocks.
A correlation of -1 would make you loose money when stocks go up.
So a real beauty would be an asset that gains when stocks tank und doesn't loose that much or even stay flat the rest of the time. That will raise the risk adjusted return of your portfolio via diversification.
Companies that behave that way in my opinion: market makers
When stocks tank the bid-ask spread widens and they make more money. Often times there is also a surge in volume during a panic which means a spike in their profit.
Finding appropiate stocks of "pure" market making firms turned out to be a pain in the ass. Most are not exchange traded - ironic.
In Europe and the US I found merely two stocks.
In order to confirm my thesis the stock has to spike during at least two volatility events.
February 5, 2018: S&P 500 fell 4% and Vix spiked
March 2020: corona stock crash
Here are the two candidates:
$virtu:
good: spikes in feb 2018 and in march 2020
bad: is also involved in prop trading - I would like to invest in a "pure" market maker
conclusion: not entirely convinced about this one
$Flow traders in Amsterdam: www.flowtraders.com
good: a pure market maker, spikes hugely in feb 2018 as well as in march 2020,
the company is making markets in Europe, the US and Asia.
It is well capitalised and has a splended return margin.
conclusion: this can act as a great diversifier to a portfolio
Do you know of any other exchange traded "pure" market makers that I might have overlooked?
I didn't look at asian stocks. Pls tell if you know of an interesting candidate.
Everybody is probably going to expect some stock with great financial figures and a strong uptrend.
Well, it does have decent figures but that is not what this is about.
We all know diversification raises your risk adjusted return.
A good diversifier is either uncorrelated or even negatively correlated to stocks.
A correlation of -1 would make you loose money when stocks go up.
So a real beauty would be an asset that gains when stocks tank und doesn't loose that much or even stay flat the rest of the time. That will raise the risk adjusted return of your portfolio via diversification.
Companies that behave that way in my opinion: market makers
When stocks tank the bid-ask spread widens and they make more money. Often times there is also a surge in volume during a panic which means a spike in their profit.
Finding appropiate stocks of "pure" market making firms turned out to be a pain in the ass. Most are not exchange traded - ironic.
In Europe and the US I found merely two stocks.
In order to confirm my thesis the stock has to spike during at least two volatility events.
February 5, 2018: S&P 500 fell 4% and Vix spiked
March 2020: corona stock crash
Here are the two candidates:
$virtu:
good: spikes in feb 2018 and in march 2020
bad: is also involved in prop trading - I would like to invest in a "pure" market maker
conclusion: not entirely convinced about this one
$Flow traders in Amsterdam: www.flowtraders.com
good: a pure market maker, spikes hugely in feb 2018 as well as in march 2020,
the company is making markets in Europe, the US and Asia.
It is well capitalised and has a splended return margin.
conclusion: this can act as a great diversifier to a portfolio
Do you know of any other exchange traded "pure" market makers that I might have overlooked?
I didn't look at asian stocks. Pls tell if you know of an interesting candidate.
