Quant Thematic - Three factor model for stocks filtration - ICICI Direct

We have tested the three step model for filtration of stocks, which has major essence of rise in delivery pick-up along with accumulation pattern.

Delivery Z-Score

The two-week delivery pick-up is compared with last three month's delivery pattern. The Z-score is calculated for each and they are ranked accordingly. The higher Z-score indicates higher increase in delivery per unit of risk.

Historical Volatility

When historical stock returns follow a uniformly distributed pattern that shows accumulation in the stock where the frequency of sharp stock downsides is lower and it has been in a narrow range scenario for most of the time. Thus, the mean is concentrated more near the lower price returns.

Frequency distribution of returns

When historical stock returns follow a uniformly distributed pattern, this shows accumulation in the stock where the sharp stock downsides frequency is lower and it has been in narrow range scenario most of the time. Thus, the mean is concentrated more near the lower price returns.

Stock Picks

IndusInd Bank

IndusInd Bank has failed to perform in line with the markets. However, in the current fall, it has shown resilience among private banks. Furthermore, the stock has been exhibiting significant accumulation in its price distribution pattern. The daily returns are largely distributed from 0% to 2%. Furthermore, the right tail is significantly longer than the left tail suggesting positive bias prevailing in the stock.

From a delivery perspective, the last couple of weeks saw below average delivery as the stock has been consolidating near its support zone of Rs. 850-900. However, the Z score has reached its lowest levels. We expect fresh delivery at the support zone.

Navin Fluorine

Chemical stocks have remained largely range bound in the last three to four months while other sectors witnessed sharp profit taking from higher levels. However, after a round of consolidation, a fresh up move is likely to be seen in chemical stocks. Stocks like Navin Fluorine are moving out of the hurdle of Rs. 3950 levels. The price distribution is also suggesting limited downward movement in the stock.

From a delivery perspective, the last couple of weeks saw above average delivery as the stock witnessed strong reversal from Rs. 3500 levels. Furthermore, the Z score remained in the positive territory suggesting increased delivery volume along with recent upsides suggesting strong hands are accumulating the stock.

For details, click on the link below:

Link to the report

Source : Equity Bulls

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