Introduction
When it comes to portfolio management, the goal is always to optimize returns while managing risks. In this post, we will analyze the daily price movements of 10 prominent Nifty 50 companies over the past month to identify stocks that could potentially enhance a profit in the short term with a diversified investment portfolio.
Key Terminology
Before diving into the analysis, let’s define a few key terms to help us understand the project:
- Opening Price: The price at which a stock starts trading for the day.
- Daily High: The highest price reached by a stock during the day.
- Daily Low: The lowest price reached during the day.
- Last Traded Price (LTP): The most recent price at which the stock was bought or sold.
These metrics will be used to compute several indicators to assess the stocks' short-term potential:
- High - Open: The difference between the highest price of the day and the opening price.
- Open - Low: The difference between the opening price and the lowest price of the day.
- Intraday Profit: The potential return from a trade based on daily price movements, which also serves as a short-term risk indicator for long-term investment strategies.
The Data
For this analysis, we will focus on 10 Nifty 50 companies and evaluate their performance over 20 trading days (roughly a month). The data for each stock includes:
- Opening Price
- Daily High
- Daily Low
- Last Traded Price (LTP)
These metrics will then be used to calculate:
- High - Open
- Open - Low
- Intraday Profit
Key Analysis
Criteria for Portfolio Selection
The goal of portfolio management is to build a collection of stocks that offer strong potential for short-term profits. We will assess the price movements of these stocks relative to their opening prices, aiming to identify those that show consistent appreciation and stability. Stocks with greater volatility and unpredictable price fluctuations will be considered higher risk and may not be the best fit for a balanced portfolio.
Stocks That We Will Avoid
Based on our analysis, stocks like Wipro, BEL, and PowerGrid showed significant volatility. While their prices did increase over time, the unpredictability of their movements makes them less suitable for short-term investments. These stocks might still have long-term growth potential but should likely be avoided for immediate portfolio gains.
Stocks to Favor for Portfolio Growth
On the other hand, stocks like HDFC Life (HDF LIC), ITC, and Coal India demonstrated stable price increases with lower volatility. These stocks showed consistent positive performance with steady price recovery, making them ideal candidates for a long-term, balanced portfolio with reduced short-term risk.
Summary
In conclusion, this analysis highlights the importance of making informed decisions when selecting stocks for a portfolio. A diversified portfolio benefits from stocks with stable price movements and minimal volatility. While stocks like Wipro, BEL, and PowerGrid may not be ideal for short-term investments due to their volatility, HDFC Life, ITC, and Coal India offer strong growth potential with more predictable returns.
By integrating real-time data using Python and the yfinance module, we can further enhance our investment strategy and make more data-driven decisions.