Alpha & Beta Index - Screener

The Alpha & Beta Index - Screener indicator provides a comprehensive dashboard for evaluating sectoral performance by calculating Alpha and Beta metrics relative to a benchmark index. This tool streamlines the process of identifying outperforming sectors and assessing their volatility, helping traders focus on market segments with the highest relative strength or specific risk profiles.

Usage

The indicator acts as a multi-symbol screener, primarily used to filter major sectors contributing to an index's movement (e.g., NIFTY). By analyzing the Alpha and Beta values displayed in the dashboard, traders can determine which sectors are leading the market.

• Alpha Analysis: A positive Alpha (Alpha > 0) indicates a sector is outperforming the benchmark. Traders typically look for long opportunities in stocks belonging to these high-alpha sectors.
• Beta Analysis: A Beta above 1.0 suggests higher volatility than the benchmark, which is often preferred by intraday traders. A Beta below 1.0 indicates lower sensitivity to market fluctuations, often preferred by long-term investors.
• Symbol Input: Users can input up to 40 symbols via the text area, separated by commas. This allows for a custom-built sector-wise watchlist.

Details

The script calculates Alpha and Beta based on the selected returns type—either Simple Returns or Logarithmic Returns. It incorporates a Risk-Free Rate of Return (RFR) to provide a more accurate financial assessment of performance.

• Beta: Calculated as the covariance of the stock/sector returns with the benchmark returns, divided by the variance of the benchmark returns. It measures systematic risk.
• Alpha: Calculated using the formula: $Alpha = R_s - [R_f + \beta \times (R_m - R_f)]$, where $R_s$ is the sector return, $R_f$ is the risk-free rate, and $R_m$ is the market return.
• Timeframes: The script supports various lookback periods ranging from 5-minute intervals to long-term monthly views (up to 48 months).

Settings

General Inputs

• Period: Selects the lookback window and chart timeframe required (e.g., 30 Days, 1 Year, etc.).
• Beta & Alpha Period: Defines the number of bars used for calculation if a specific "Period" is selected.
• Benchmark Index: The reference symbol (e.g., NSE:NIFTY) against which Alpha and Beta are measured.
• Risk-Free Rate of Return: The symbol for treasury or government bond yields used in the Alpha formula.
• Returns Type: Choose between standard Returns or Logarithmic Returns for compounding accuracy.

Input Symbols

• Paste Symbols: A text area to input the list of symbols for the screener dashboard.

Table

• Color Beta Above/Below: Thresholds to visually highlight symbols based on their Beta values.
• Position / Size: Customizes the dashboard's location and text scale on the chart.
• Text Colors: Defines colors for positive, negative, and neutral values.

FAQ

How do I interpret a sector with high Alpha and high Beta? A sector with high Alpha and Beta > 1 is currently outperforming the market but with higher-than-average volatility. This is often a target for momentum traders.

Why does the table show a warning about the timeframe? The indicator is optimized for specific periods. If you select "Short Term - 30 D", the script expects you to be on a Daily (D) timeframe to ensure the data calculations align with the intended lookback.

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