Risk Map Plots Market Risk

March 14, 2002 (PLANSPONSOR.com) - RiskMetrics Group unveiled its Risk Map of the Market application, aiming to provide investors with a picture of the risk in their portfolios.

Risk Map plots the S&P and the Nasdaq stocks on charts, color-coded to depict the different ranges of stock price volatility, allowing investors to identify risk hot spots.

Stocks are arranged by market cap and stock price volatility:

  • the most volatile stocks appear as red boxes while the least volatile stocks are represented by blue boxes
  • stocks with the largest market caps are arranged on the left-hand side of the chart, moving gradually to the right-hand side of the chart as market caps get smaller.

RiskMetrics explains that as a mouse is scrolled over each box, the user receives:

  • a risk synopsis of that stock, including its RiskGrade (see Risk Metrics Helps Gauge Investment Risk ), which  measures volatility on a scale ranging from zero for cash to 1,000 or higher for the riskiest investments
  • its Xloss, a measure of the amount an investor could potentially lose on a bad trading day based on an average of the stock’s worst trading days, and
    the RiskImpact of that stock on the rest of the holdings in the index

The Risk Map of the Market can be delivered as both a stand-alone module and as part of the group’s investment management platform, WealthBench, according to a media release from the company.

Earlier this month the company released its RiskGrades Suitability Scale (see RiskMetrics Puts Out New Risk Scale ), which measures the risk of different investment strategies such as conservative, growth, and aggressive.