What Data Do You Need to Analyze an Investment?
While in-depth data analysis is often applied to business or personal finances, it’s also increasingly being used by average investors to track assets. This is not to suggest it’s some new phenomenon; professional investors and larger funds and investment firms have long taken advantage of powerful, advanced analytical tools. However, with more people who have gained access to data analytics tools and learned how to use them, taking a data analytics approach to investment is now possible for everyone.
That doesn’t mean you’ll be handling the same amount of data, or doing the same depth of analysis, as a high-end investment firm. However, using accessible analytics tools, the right data can give you some fairly valuable insights into personal investments.
Here are a few of the things you might consider plugging into your analysis.
Before you get into assessing a particular stock or asset you might be interested in trading, it can be helpful to develop a feel for the market around it. The movement of a stock exchange does not, of course, determine that of any individual stock’s — but it can still provide valuable insight within a broader analysis.
Asian-Pacific market charts are easily accessible online, and can be examined in detail such that you can pull and plug in whatever data points you wish to include. At the very least though, it would be wise to take note of daily highs, lows, and movement for any market in which you’re trading assets. So, for example, if you’re looking to trade Panasonic Corp., you’ll want to keep tabs on the Nikkei 225, where it trades; if you’re investing in AIA Group Limited, track the HSI, and so on.
The most straightforward data you’ll want to plug into whatever analytical tool you’re using is the pricing of any asset you’re actually trading. As with the markets, our suggestion would be to include, at minimum, notes on the asset’s high, low, and movement for any given day. These data points are easy enough to reference on their own whenever you need them, but plotting them over time can help you to begin constructing meaningful analysis that can lead to more strategic trading.
Similar Assets’ Prices
Tracking assets similar to those you’re investing in, or which are at least classified similarly, can also help you to put together more robust data. This is perhaps most clearly illustrated in the commodities market. Most are familiar with the idea of trading gold, or oil — but when you look at commodities that are popularly traded, you’ll also see assets like sliver, coffee, and various other metal and agricultural products.
None of these necessarily relate to one another directly. But sometimes, a more comprehensive understanding of the commodities market can still be helpful. (For instance, you might see where commodity traders are moving their money if one resource crashes.) So, in this example, you might regularly input data relating to movements in oil, coffee, and soybeans, even if you’re only actually invested in gold. The same idea applies to stocks and other assets as well. Tracking your investment’s closest counterparts can never hurt.
Asset P/E Ratio
Price to earnings ratio, or P/E ratio, is one of the most important analytical data points that experienced investors use — even if it might be entirely foreign to a market newcomer. To illustrate its importance, consider this: Last year, the Hong Kong market was said to be facing a drought of initial public offerings on the grounds that its average P/E ratio was at its lowest in years. In other words, companies were hesitant to even be listed in Hong Kong simply because of poor indications in existing listings’ P/E ratios.
As to what exactly a P/E ratio is, it is essentially a formula: a company’s listed price divided by its EPS, or earnings per share. The listed price is simply how much a stock is worth publicly at any given point; the EPS is something reported by the company, which can be found through most established trading platforms. Ultimately, the P/E ratio is used to determine what some consider a more accurate valuation of a stock. Tracking it over time can add valuable information to your data analysis.
This is a very simple type of data point to add, but nevertheless one that’s worth your while. Basically, we’re suggesting that you plug in information relating to an asset’s past performance (perhaps in weekly, monthly, or quarterly intervals). The past activity does not dictate future performance, but it can’t hurt to identify trends in pricing, counterpart pricing, P/E ratio, or anything similar.
This is not a comprehensive list. Experienced investors will go further with technical details and additional means of measuring asset value. If you’re just starting up though, these categories can represent the beginning of thorough data operation.