Bubble Charts provide a great visualisation of the types of shares in a Stock Screen or Folio. At a glance these charts show the trends and patterns in a group of stocks and can help identify areas of concern.
Bubble Charts are a graphical illustration of Stockopedia’s StockRanks. StockRanks are a system of scoring and ranking every share in the market for Quality, Value & Momentum. Each of those factors is calculated by averaging the rankings of various ratios for each company.
StockRanks are designed to assist in the selection of cheap, good quality, improving stocks, which are statistically more likely to beat the market over the long term as part of a balanced portfolio. By contrast, expensive, low quality, weakening stocks have a general tendency to underperform the market.
You can launch a Bubble Chart using the Data View Bar on any table or folio in Stockopedia. Clicking the Bubble Chart button on the far right-hand side of the Data View Bar will transform the list of shares into a Bubble Chart.
The main Bubble Chart view is divided into two sections. To the left is the main Bubble Chart. On the right is the list of shares that appear on the Bubble Chart together with their overall StockRank position.
By default, the main Bubble Chart view shows the position of the stocks based on Quality Vs. Value. By clicking the tabs at the top of the Bubble Chart you can switch the chart to show Value Vs. Momentum or Quality Vs. Momentum.
These combinations of ranking factors are known as StockRank Crossovers. They are designed to highlight how individual companies score against any combination of the three main Quality, Value and Momentum factors.
Hovering over any Bubble will reveal the company name and its score for each of the ranks.
By definition, each Bubble Chart comprises two axis. In the case of Quality Vs. Value, the Quality axis plots stocks between Junk and Good, and the Value axis plots stocks between Expensive and Cheap.
The chart includes two clearly defined ‘catchment’ areas. The red area in the bottom left-hand side of the chart captures shares that rank in the bottom 20% of the market for the StockRank Crossover. The green area represents the top 20% of the market.
These clearly defined spaces are designed to highlight the strengths and weaknesses in a group of shares. If a portfolio is loaded with stocks in the bottom left corner of the bubble chart, it might be worth considering why that is and thinking about reallocating some funds to other areas of the market. But it’s worth remembering that some low ranking stocks may well perform well, while some high ranking stocks might lag. However, statistically, higher ranking stocks have the characteristics that on average tend to producer better returns over the long run.