Using SerieSimpliCity to evaluate the complexity of series behavior provides an idea of its risk degree. The more complex is behavior, the higher is risk level. Naturally, if one is free to choose, it is necessary to select that company, whose price behavior is less risky. In this case, the risk has two interpretations.
- First, it reflects complexity of behavior - that of chart line brokenness degree, its serration. In other words, SerieSimpliCity numerically expresses our intuitive perception of complexity of process behavior.
- Second, this number allows to visually estimate number of factors influencing a process. In addition to satisfying pure research interest, this information is extremely useful to a broad variety of financial series forecast and analysis tools, including off-line products.
What stock should be preferred?
The one with simpler behavior!
| Less factors influence your stock price > > it is easier to analyze. |
 |
| Less factors influence your stock price >> it is easier to forecast its future prices. |
 |
|
SerieSimpliCity provides you with a quantitative tool for risk degree evaluation of any time series. This series could describe stock prices, technical indicator or stock index values, trading volumes, changes in yield, or any other financial information. When any changes in the stock market occur, SerieSimpliCity will help to quickly make a precise and intelligent selection of trading tools. |
 |
SerieSimpliCity is based on the calculation of information dimension C. Since this value reflects degree of mutual influence of adjacent chart points, sometimes it is referred to as correlation dimension. This value plays an important role in the information theory, and in other areas of modern science.
Let’s consider, for example, two time sequences – daily closing prices and volumes of Microsoft stock within the period from April 15, 1999 to March 30, 2001 (fig.1).
Figure 1. Daily closing price and volume of MSFT.
Which time series is more complex?
Intuition suggests: the one on the right. Correct! Your intuition didn't fail you. Here is how it is displayed in terms of correlation dimension.
|
MSFT. Daily Close |
MSFT. Daily Volume |
| Dimensionality C |
3.08 |
4.12 |
|
Dimensionality comparison shows that:
- Volume series is more complex;
- Number of factors influencing the price is from 3 to 7, while those influencing the volume – from 4 to 9.
However, the intuition is not always a reliable adviser. Look at figure 2.
Figure 2. Daily closing prices for MSFT and YHOO.
Which time series is more complex?
What does the intuition say in this case?
Do you want to know the answer when your intuition keeps silence? Use SerieSimpliCity >>
|
Main
