If you’re looking to add cybersecurity to your portfolio, this is a good place to start. Note: I work mostly with startups, where the investment metrics are a lot more difficult to calculate/predict…:
When picking securities from a fast-growing sector like the cybersecurity (HACK) sector, after performing fundamental analysis to examine stocks that should be added to your portfolio, it is equally imperative that you perform a risk analysis. When performing a risk analysis, a peer-based risk analysis is recommended. This provides a basket of comparison for the stocks in your portfolio. While risk analysis can’t be used to predict future returns, it can help understand three things:
- The success and evolution of a group of highly correlated stocks over the years.
- Investors’ sentiment and attitude towards the stocks as captured by the level of volatility which is often driven by management’s performance, guidance, and the level of macro uncertainty.
- The risk to reward measure of the stocks.
In this analysis, we will be performing a risk assessment of eight cybersecurity stocks from October 2013 to December 2018.