RiskGrades (RG)

What's the significance here?

RiskGrades (RG) is a reserved method for calculating the risk of an asset. RiskGrades is a standardized measure for assessing the volatility of an asset across an assortment of asset classes. The scale begins at zero which is the least risky rating. A rating of 1,000 equals the standard market risk of a diversified market-cap weighted global equity index. RiskGrades change over the long run to reflect the unsystematic risk of an investment as well as expansions in overall systematic risk in the market. RiskGrades depend on a difference covariance approach that measures the volatility of assets or asset portfolios as the scaled standard deviations of the returns.

More complex RiskGrades estimations take into consideration a couple of extra concepts. To compute the RG of an asset, utilize the accompanying formula:
$\begin &\text$i = \frac { s_i \div 12 }{ 0.2 } \ &\textbf \ &s_i = \text \ \end​RGi​=0.2si​÷12​where:si​=monthly standard deviation of the asset​
The RG of a portfolio of 2 assets is calculated with the accompanying formula:
$\begin &\text2_p = ( W2_1 \times \text2_1 ) + ( W2_2 \times \text^2_2 ) \ + \ &\phantom{\text^2_p =} 2 \times W_1 \times W_2 \times r${12} \times \text_1 \times \text_2 \ &\textbf \ &W = \text \ \end
The Undiversified Risk Grade (URG) of a similar portfolio utilizes the accompanying formula:
$\begin &\text_p = ( W_1 \times \text_1 ) + ( W_2 \times \text_2 ) \ &\textbf \ &W = \text \ \end$
To decide the benefit from diversification, we can utilize RiskGrades to decide the Diversification Benefit:
$\begin \text_p = \text_p - \text_p \ \end$

Figuring out RiskGrades (RG)

RiskGrades were developed by JPMorgan. You can utilize RiskGrades to decide the level of risk in your portfolio in view of the accompanying numbers:

The RGof a risk-free asset is expected to be zero.

The RG of an okay asset is expected to be zero to 100.

Normal stocks/indexes ought to have a RG of 100 to 300.

Stocks with a RG of 100 to 800 are viewed as high risk.

[IPOs](/initial public offering) have a RG greater than 800.