The Performance & Risk Chart™ is a powerful visual tool to help investment professionals and fiduciaries understand the historical relationship between a stock’s market price and its underlying risk profile. By selecting any stock symbol and defining a date range, users can generate a detailed chart that overlays the company’s share price (in blue) with its risk ratings (colored zones) derived from one of up to 14 proprietary ERS metrics.
The background color of the chart changes dynamically to indicate the risk level at any point in time—from very low risk (dark green) to very high risk (dark red). To the right of the chart, the Proof Table™ displays the empirical results of the selected risk rating, showing how often each risk level led to gains or losses over a specified holding period. This guide will show you how to use this tool to interpret stock risk history, assess predictive reliability, and make data-informed investment decisions.
Loading Data
To begin using the Performance & Risk Chart, follow these steps to configure your chart:
1) Enter the Stock Symbol and Date Range: Start by typing in the stock symbol (e.g., F for Ford Motor Co) and selecting your desired start and end dates. This sets the timeframe over which the chart will display both the stock price and the selected risk rating.
2) Use the Quick-Select Date Buttons (Optional): For convenience, you can click one of the preset buttons—such as “5-Yr” or “15-Yr”—to automatically set the date range to that number of years ending on today’s date.
3) Select a Metric or Rating: Choose the proprietary ERS rating or metric you want to analyze. The default is the Price Risk Indicator™ (PRI), but the dropdown offers up to 14 different metrics designed to assess different aspects of a company’s risk or value profile.
4) Adjust the Display Settings (Optional):
- Use Log Scale: Check this box to display the price chart on a logarithmic scale, which is helpful when analyzing large price swings or comparing percent-based movements over time.
- Full Rating Axis: When checked, the risk rating scale will display the full possible range (e.g., 0 to 100 for PRI), making it easier to interpret relative changes across the entire spectrum.
Once you’ve configured all the settings, click the green “Create Chart” button to generate the chart and begin your analysis.
Reading the Chart
Once you’ve created a chart, you’ll see two primary data layers displayed over time:
Price Line (Blue): The blue line represents the stock’s actual closing price over the selected time range. This allows users to track historical performance and see how the market has valued the company over time.
Risk Ratings Overlay (Color Bars): The background color beneath the price line shows the risk rating level generated by the selected ERS metric or proprietary model—PRI™ in this example. These colored bars indicate how favorable or unfavorable the risk conditions were at any point in time. Each color reflects a different risk tier:
- Green and Dark Green correspond to periods of low or very low risk.
- Yellow indicates a period of moderate risk.
- Red and dark red indicate high or very high risk.
How to Use This Visualization
By aligning the price movements with the risk colors, users can assess:
- Whether the rating system identified warning signs before major drops (as seen for Macy’s between 2015–2018).
- When the model flagged very low-risk conditions that preceded price recoveries (as in mid-2020 and early 2021).
- How often the stock was in high-risk territory before a sharp downturn or volatility.
The chart empowers users to visually test the effectiveness and timeliness of any selected risk metric, allowing for deeper understanding and greater confidence in the data.
The Proof Table
The Proof Table™ is a statistical summary that quantifies how effective the selected risk rating was at predicting stock performance. It analyzes thousands of historical data points and answers two key questions:
- What was the average return after holding the stock for a given period when it had a specific risk rating?
- How often did the stock produce a gain when held from each risk level?
Before generating the table, users can fine-tune how that history is divided by adjusting the Proof Table control panel.
Default Settings Are Recommended for Beginners: While these controls offer powerful customization for experienced analysts, we recommend new users keep the default settings until they’re comfortable with interpreting the results.
Hold Period (Months): This setting determines how long a stock is held after a rating is assigned. For example, entering 12 calculates the average 1-year return following each instance of a given risk rating.
Group By: This determines how the system groups the risk levels of the selected stock:
- Nominal: Groups are based on the absolute rating values (e.g., a PRI score of 35 is always “moderate risk”, a 70 is always “high risk”, etc.).
- Relative: Groups are based on how the rating ranks compared to the stock’s historical average, high and low risk levels (e.g., a PRI score of 35 is “low risk” if 35 is the best rating that stock ever reached)
Categories: This dropdown lets users choose how granular the grouping should be. More or fewer groups affect how precise or general the Proof Table outcomes are.
Once these settings are selected, click “Calculate Proof Table™” to generate the results.
After clicking “Calculate Proof Table,” the system generates a table that summarizes the actual outcomes of investing in the selected stock (in this case, Macy’s Inc) based on its historical risk ratings. Each row corresponds to a specific risk category (A+, A, B, etc.), and the columns present key performance statistics.
Columns Explained
- PRI™: The rating category at the time of purchase, ordered from least risk at the top of the table to most risk at the bottom of the table. Under the default settings, ratings will range from A+ (best) to F (worst).
- # Days: The total number of trading days during the selected time range where the stock was assigned each rating.
- Average 1-Year Return: The average return (in percentage) one year after the stock received that rating.
- Prob. of Gain: The percentage of times the stock produced a positive return one year after receiving that rating.
Note that some of these headings will change depending on the settings you selected before loading the chart. For example, if you set “Hold Period” to 24 months instead of the default of 12, then this table will refer to “2-Year Returns” instead of 1-year returns.
