Past Results – EqaxScore
The past is often the best predictor of future. So let us see how Eqax Ratings have fared over the past data (from 20th March 2006 to 11th December 2013).
EqaxScore is the topmost level rating in Eqax. This rating is built after considering all the parameters of the company.
As we can see in Graph A, over a period of 6 months, Average absolute change in share price as well as Average change with respect to sensex* both increase steadily as EqaxScore increases. Not just that, we also see that the performance increases exponentially as EqaxScore reaches 80-85 and goes on increasing drastically till it reaches 100. This shows that EqaxScore is a very good indicator of what share price will be in the future and a high EqaxScore has a great correlation with very high returns.
Now let us take a look at Graph B. This is very similar to Graph A, but this deals with probability of profit being higher than 7%** and probability of beating Sensex rather than magnitude of the change. These are collectively called Hit Rate. It is as important a factor as the total return which we get. As we can see, the probability of a share doing well also increases steadily as its EqaxScore rises and after a point starts increasing drastically.
* Average Change with respect to sensex is a composite figure which considers sensex movement along with stock price movement. So if a share goes up by 20% but in the same duration, Sensex also goes equally up, then absolute change is 20% but change relative to sensex is 0%.
** The reason we consider 7% as benchmark is because you get 4% returns in 6 months in Fixed Deposits, about 1% will go in brokerage charges and about 1% in transaction variance. So to make 1% in actual profit, share price has to go up by 7%.