Screener: Alpha & Beta

The Screener: Alpha & Beta indicator provides a live scanning interface to monitor multiple stocks simultaneously based on their Alpha and Beta values relative to a benchmark index. This tool helps traders identify high-volatility opportunities for intraday trading and outperforming assets for long-term positions by calculating systematic risk and excess returns in real-time.

Usage

The Screener: Alpha & Beta is designed to filter a list of up to 40 stocks based on user-defined performance thresholds. For active intraday trading, it is recommended to use a 5-minute timeframe to capture dynamic changes in market sentiment.

• Intraday Trading: Traders should focus on stocks with a Beta above 1, indicating higher volatility than the benchmark. This often translates to larger price swings suitable for day trading.
• Long-Term Investing: Investors may prefer stocks with a Beta below 1 for stability and an Alpha above 0, indicating the stock is outperforming the benchmark after adjusting for risk.
• Sector Analysis: It is recommended to select 10 to 20 stocks representing various sectors to maintain a balanced view of market weightage.
• Live Updates: Beta and Alpha values are dynamic; it is advised to update your symbol list weekly or monthly to reflect current market trends.

Details

The indicator calculates Alpha and Beta using the Capital Asset Pricing Model (CAPM) framework.

• Beta: Measures the systematic risk or sensitivity of a stock's returns relative to the returns of a benchmark index (e.g., NSE:NIFTY). A correlation and standard deviation ratio are used to determine how much a stock moves in relation to the market.
• Alpha: Represents the excess return of a stock over its required return (calculated via CAPM). A positive Alpha suggests outperformance, while a negative Alpha suggests underperformance relative to the risk taken.
• Risk-Free Rate (RFR): The calculation incorporates a Risk-Free Rate of Return, which can be customized based on government bond yields (e.g., US 2-Year Treasury or India 3-Month Yield) to provide a more accurate financial model.

Settings

General Inputs

• Period: Selects the lookback timeframe for calculations, ranging from 5-minute periods to long-term 4-year views.
• Beta & Alpha Period: Defines the number of bars used for the calculation (default is 252 for annual trading days).
• Benchmark Index: The reference symbol used to calculate relative performance (e.g., NIFTY, SPX).
• Risk-Free Rate of Return: The symbol for the nation's risk-free rate chart used in the CAPM formula.
• Returns Type: Choose between standard "Returns" or "Logarithmic Returns" for the calculation basis.
• Beta Between: Filters the screener to only display stocks within a specific Beta range.
• Alpha Between: Filters the screener to only display stocks within a specific Alpha range.

Input Symbols

• Paste Symbols: A text area where you can input up to 40 symbols separated by commas (e.g., EXCHANGE:SYMBOL).

Table

• Display Rows: Limits the number of rows visible in the screener table.
• Position: Adjusts the table's anchor point on the chart.
• Size: Controls the text size of the screener data.

FAQ

How do I interpret a Beta value higher than 1? A Beta above 1 indicates that the stock is more volatile than the benchmark index. If the index rises, the stock is expected to rise more significantly; conversely, it may fall more sharply if the index declines.

Why does the screener show a timeframe warning? The indicator includes a built-in check to ensure your chart timeframe matches the selected "Period" in settings. If they do not match, a warning will appear to ensure calculation accuracy.

How can I access Screener: Alpha & Beta? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.