Mansfield CSR

economic-dictionary

Mansfield RSC is an indicator used for trading that reflects the comparison of two securities. The acronym RSC refers to its English name Relative Strength Comparative of Mansfield. Translated into Spanish it would be something like Mansfield's Comparative Relative Force.

Mansfield's CSR is an indicator that informs us of the strength or weakness of the prices of some assets compared to others. Unlike normal Comparative Relative Strength, Mansfield's RSC is calculated as the average of the last 52 weeks.

How is Mansfield's RSC calculated?

Mansfield's RSC as an indicator of relative strength is calculated taking into account three components:

Ratio = Price of the base asset / Price of the asset with which it is intended to compare.

Average value = Sum of the last 52 ratios / 52 periods (usually weeks)

Variation = Average value (t) / Ratio (t-1)

A cumulative sum of the variations is made. If it is above zero, the compared asset grows more on average during the last 52 weeks than the reference asset. Conversely, when below zero, the compared asset performs worse on average over the past 52 weeks than the benchmark asset. The absolute value of the index is not very relevant. What is really relevant is whether the indicator is above zero or below zero.

Compared assets and comparable assets

Theoretically, any two values ​​can be compared. However, it is common to compare an asset with a benchmark. Either a reference index of the world market or of your index in particular. For example, if we want to compare any sector or any stock index, it is normal to compare it against the S & P500. The Standard and Poor’s is the world's benchmark stock index. Now, if we are interested in comparing a company with its specific activity sector, we will have to compare it with that index.

Ibex 35 vs Standard & Poors 500

As can be seen in the previous graph, the Ibex 35 has only been on average a stronger value than the S & P500 between February 27, 2017 and August 21, 2017. The rest of the dates have always been lower. How is this indicator interpreted in stock market terms? If it is above zero, we will say that it is more likely to rise more when the overall market rises and that it is more likely to fall less when the market falls.

Repsol vs subsector of gas and oil producers

In the graph above, it can be clearly seen that as of May 2, 2016, with the exception of two months of doubt, Repsol rises in the stock market, on average, more than its subsector. That is, the price rises more when companies that do the same rise, and falls less when companies in its sector fall.

Mansfield CSR Utility

The main utility of this indicator is to find the strongest stocks to invest in. One of the stock market dogmas for some trading systems is: "Always buy strength, never weakness." Or what is the same, buy those values ​​that rise the most, not those that rise little or fall more than the market average.

Many new investors believe that if a company goes down it is an opportunity since it is "cheaper". Nothing is further from reality. The term cheap or expensive depends on many factors. The fact that a company is cheap has little or nothing to do with its behavior on the stock market.

So much so that a company that goes down a lot can be expensive, and a company that goes up non-stop for a year can be cheap. Warren Buffett, who many consider the best investor in history, always says that price is what you pay and value is what you receive. If you pay a million euros for a work of art that is valued at two million, you have bought cheap. The value of a company on the stock market is a very subjective term that, according to the analyst, depends on both factors.

Tags:  administration Argentina markets 

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