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Risk Assesment

Pillious DayTrading risk description

We want to give you insight into the known risks of buying and selling financial instruments. As with any other investment, including in single shares, Pillious DayTrading has the risk for losses that cannot be determined in advance, and previous returns and price developments cannot be used as a reliable indicator of future returns and price developments.
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RISK MEASURED AS VOLATILITY

The EU has created a common risk scale, which is divided into seven categories, where category 1 is low risk and category 7 is high risk it is leverage and shorting which one will divide into the red color. The scale is based on how risk versus return is typically related. Investment risk is, according to EU guidelines, the annualized standard deviation of weekly returns over a 5-year period, that is, fluctuations in weekly returns. The current category for Pillious is at 4 out of 7 in Pillious Arbitrage this is our own assessment.

 

GENERAL RISK OF THE DAYTRADING STRATEGY

The shares for the short-term portfolio are chosen based on our monitoring effect, so that the shares that show an upward trend has been down, as well as showing momentum at the time of monitoring are usually bought for 30-50% of the portfolio. The biggest risk in the monitoring time in Pillious is performance-related, which means that there is a risk that the shares purchased are not the ones that subsequently increase most as expected if the performance is not within 1-2 days this is usually not something we want on the books, as we only want the best of the best stocks. As a stock analyst you can be wrong and sometimes you just have to sell with a small loss (-1.5%) if it does not perform as expected and a new quality share must replace it.

 

COMPANY SPECIFIC RISKS

The portfolio can consist of 10 single shares that our analyst team selects, only a few go through the process and the stock that shows short-term potential is bought. The value of each share can fluctuate greatly in value relative to the overall market, and there is a risk that a single company will lose all or part of its value, however, we will monitor the share closely within to ensure that there is no volatility. At the time of purchase, however, it cannot be ruled out that it shows unforeseen fluctuations in purchases, if it does not continue its stable fluctuations in an upward trend, we are cashing out, even though the stock has not performed. In order to minimize this risk, we only invest in individual stocks placed in the elite indices and not invested in small indices with a lack of liquidity. In addition, we only invests in shares that have been listed for at least one year.

 

MARKET RISK

Financial markets can sometimes fluctuate greatly in value, so it is important to understand this before you start investing in shares. In such circumstances, stocks across countries and sectors will often correlate more than usual and therefore one needs to have a tight stop loss policy and investment strategy to follow. If you want to insure yourself in the best way possible, against crises in the market. You should both diversify your investments on corporate and sectoral diversification, additionally on different strategies and markets. Sometimes however it does not necessarily help to mitigate the effects of such fluctuations, as they often occur on a global scale. The movements may therefore affect the value of the shares in one’s portfolio, so it is important to stay within or to have a distribution of several shares in the portfolio with different weighting. If you close the positions at -2% or due to lack of performance this is preferable in a troubled market.

 

CONCENTRATION RISK
The investments in Pillious can be concentrated in both specific countries and sectors, if these show higher momentum than other countries and sectors, we see this as an attractive opportunity to make excess returns, however, it should be mentioned that if you join and follow the Danish portfolio, you will receive stocks located in Denmark. In the case of concentration risk, the greatest risk will be associated with sectors rather than countries, as concentrations in sectors reduce the diversification advantage to a much greater extent than a country concentration. To counter this, the Pillious portfolio has a sector limit of the portfolio value in the ongoing rebalancing of the fund. Between rebalancing, a sector may for some time exceed the limit as a result of overperformance.


CURRENCY RISK

Our investment strategy is based on trading in a country with the same portfolio, so you have no currency risk unless you choose to buy access to our other portfolios around the world. The US portfolio as a non-US citizen, will involve a currency risk, as the US dollar can be very volatile in uncertain times. Therefore, in our US portfolio, we are exposed to currency risks, which adds a layer of risk to the existing exchange rate risk if you are not a US citizen, investment in securities always entails a risk of loss. By being long-term in a stock, you are also long in the dollar, and therefore in the worst case scenario you can lose on your investment, even if you are plus on the stock increase. In Pillious, currency exposures to equities in foreign currencies are uncovered. But naturally we want to take into account, long-term currency cycles without having to hedge through derivative financial instruments.

COUNTERPARTY RISK
Deposits, i.e. Having a portion of the portfolio funds in the bank is not part of the investment strategy. Due to denomination conditions, holidays and redemptions and issues, deposits may occur periodically, very briefly possibly with large amounts when the share is entered or withdrawn with large amounts. During such periods, there is a risk that the counterparty, in this case the bank, will be unable to meet its obligations.

LIQUIDITY RISK

Unforeseen and unpredictable events in the financial markets may mean that the shares in the portfolio can no longer be sold as we had planned, since there must be a buyer for the shares on an ongoing basis. Sudden crises and negative events, as well as collapse of the stock exchange or closure, could significantly increase liquidity risk. In order to minimize liquidity risk, the investment strategy is centered solely on highly liquid stocks from the world’s leading indices dow30, S & P500 and Nasdaq, and shares can only be purchased for the portfolio, which at the time of purchase is part of the official elite indices in the countries included in our the momentum strategy.
If the shares do not carry out our ESG screening, they will not be included in the portfolio. In spite of this, it cannot be guaranteed that the above events will not affect the price or rate at which we will be able to buy and sell the shares.

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