Drawdown - Price vs Fundamentals

2021년 8월 29일

In this study, we are trying to compare drawdown from ATH of price and fundamentals to understand if price drawdown is really justifyable or if this is the buying opportunity.

For example, BABA in the chart below shows that price has come down by more than 50%. But, the fundamentals has not changed upto this extent.



This may be viewed as buying opportunity from the eyes of fundamental based trader.

Similarly LPX is trading at 15% below ATH whereas fundamentals are at peak. This again can be considered as buying opportunity.



AAPL on the other hand is trading almost near ATH whereas fundamentals are having higher drawdown.

Well, this is just one factor to consider. I am about to release another script which can demonstrate amount of time (in terms of percentage) instrument trades at certain drawdown range. This looks something like this:


These two scripts can be used in conjunction to define your fundamental based trade.

I can add more funcamentals to the list. But, the higher value of fundamental should correlate to better position. Hence we cannot use things such as PE (which inversely correlates to value). Also need to keep the factor which includes total number of shares in it so that it is not affected by share dilution. Hence, have considered Total Revenue per Share instead of Total Revenue in this script.

Thanks to mattX5 for suggesting fundamental based ideas in this line :)