Page 21 C H A P T E R 8 C H A R T S A N D G R A P H S F O R A N A L Y S I S The preceding chapters have all dealt with options involving entering data into the OWL Personal Portfolio Manager. This and the following chapter deals with what all that data entry gets you. The Analysis Charts capabilities of the OWL Personal Portfolio Manager will provide you with a quick easy means of obtaining some of the standard portfolio analysis tools which are commonly used by professional investors. When you execute the "ANALYSIS CHARTS" option from the main menu, the charts menu is displayed, listing the following options which are described below. ÕÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍ͸ ³ C H A R T S M E N U ³ ÆÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍ͵ ³ PRICE VOLUME CHART ³ ÃÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ´ ³ RP - STOCK VS INDEX ³ ÃÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ´ ³ RP - STOCK VS STOCK ³ ÃÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ´ ³ RP - INDEX VS INDEX ³ ÃÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ´ ³ STOCK/INDEX CORRELATE ³ ÃÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ´ ³ INDEX/INDEX CORRELATE ³ ÃÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ´ ³ RETURN TO MAIN MENU ³ ÀÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÙ Table 8-1 PRICE VOLUME CHART You will select this option to obtain a graphical display of the price and trading volume of a security in your portfolio data base to the extent you have recorded this data using the "UPDATE PRICE HISTORY" option. After selecting this option, the "SELECT SECURITY TO CHART" menu will appear listing all securities in your portfolio data base. Once you have selected a security from the menu, the price volume graph will be displayed in the form of two bar charts. The upper chart shows the weekly highs and lows using a vertical line with the closing price being shown as a tick mark on the line. The lower graph shows the trading volume in the form of a simple bar chart. Four options are displayed below the two graphs. These are executed by pressing function keys F1 through F4 and provide the following capabilities. Page 22 F1-> Moving Average Computes and displays a moving price average. After pressing F1, you will be requested to enter the number of weeks to average over. After entering the number, the moving average is displayed as a dashed line. This option may be executed repeatedly to compute multiple moving averages of different durations. F2-> Price Cursor Displays a movable horizontal line and the price which corresponds to that line. The line is moved using the up and down arrow keys on the keyboard. The precision of displayed prices is dependent on the resolution of your graphics display. Exit this function by pressing F4. F3-> Volume Cursor Same as the Price Cursor option except that the line is displayed on the trading volume graph. F4-> Charts Menu Press F4 to return to the Charts Menu. RP (RELATIVE PERFORMANCE) GRAPHS Three relative performance graphs are available. These are Stock vs Index, Stock vs Stock, and Index vs Index. In general these options display a plot of the price changes of the first selection relative to the price changes of the second selection. For instance, the stock vs index option displays the changes in price of a security selected from your portfolio data base relative to changes in a market index which you select. After selecting one of these options, the "PLOT PERFORMANCE OF" menu will be displayed offering selections of the security or index you wish to plot the relative performance of. After choosing from this menu, the "RELATIVE TO" menu will be displayed offering selections of the stock or index against which your first choice will be plotted. Once you have made both selections, the relative performance graph will be plotted on your screen. This graph displays a dashed horizontal line which serves as a reference line and a solid line which displays the relative performance for the selections which you made. If the relative performance line falls on the reference line then the percentage change of your first selection is equal to the percentage change of your second selection. This graph is scaled such that relative performance ranges from 100% (top) to -100% (bottom). If your RP line reaches the top of the graph this means that your first selection has performed twice as Page 23 well as your second selection. If it reaches the bottom then it has performed half as well. You should note that if your line does reach the top or bottom of the graph, it will automatically wrap. When you are finished viewing your graph, press any key and you will be returned to the charts menu. STOCK/INDEX CORRELATE This option is useful in determining the level to which changes in the price of a security are influenced by changes in larger market sectors (a market index). After you execute this option, you will specify a security from your portfolio data base and a market index by selecting them from separate menus. The first graph which appears is a scatter graph. This plots the security price (y-axis) versus the market index price (x-axis). A diagonal reference line is plotted which indicates zero-relative performance. The other line which is plotted is the line of best fit which is computed using a least squares linear regression. The arithmetic formula for this line is shown at the top of the screen along with the correlation percentage. The correlation percentage is the percent to which the variation in the price of the security can be attributed to the variation in the market index. After viewing this graph, simply press any key to view the second graph. The second graph displays the price of the security over time similarly to the price volume chart. A solid line is plotted on the same scale and represents the solution of the arithmetic formula computed above. This is the price of the security which is predicted from the market index. Dashed lines are plotted above and below the solid line and represent the predicted price plus or minus one standard error respectively. INDEX/INDEX CORRELATE This option provides the same correlation analysis as that provided by the STOCK/INDEX CORRELATE option except that rather than correlation between a stock and a market index, correlation is performed between two market indexes. This option is useful in determining the level to which changes in one market sector are influenced by changes in another market sector. For example, you may wish to compare the "Blue Chip" market as measured by the Dow Jones Industrial Average against the over the counter market as measured by the OTC index.