Comparison of annualized average return over a market return enables investors to understand the return generating capacity and the performance of stocks.
Global markets crashed after the 2008 recession is one of the best examples. In such a scenario, trend analysis of stocks using a comparison of average returns and market returns provides an investor with information to make optimal investment decisions.
Due to diverse impacts and severe threats to investors, there is a need to examine the annual average returns and market returns of stocks in presence of financial crisis.
The annual average returns of a stock define the earning possibility of investor from a particular investment whereas the market return states the return deriving capacity of all stocks traded in the market.
This article compares the annual average returns against the market returns for the time period 1st April 2000 to 31st March 2020 into 5 different groups.
Autoregressive Integrated Moving Average (ARIMA) is the statistical tool with a standard structure which though is simpler but provides skillful information about the stock market.
Stocks categorization is the process wherein stocks are classified into three categories. Ratio analysis is an invaluable tool for stocks categorization.