Chart Features

A synopsis of the techniques used to standardise charts in Investors RouteMap

Timescales  |  Values in Reverse Order  |  Linear and Log Scales  |  Base Date  |   Colours Standards

 

Standardised chart features for easier visual comparisons

Timescales

Investors RouteMap uses only two standardised timescales on the horizontal axis, even if the full historic time series is not available, or is meaningless. In this way user looking at a given part of the screen will know that he is comparing like time periods when looking at the same part of the screen while switching from one chart to another. There is a long-term scale covering half a century to identify long-term trends and highlight cyclical patterns and a medium-term scale covering two decades to examine the current position in greater detail.  

 

Up means better and down means worse. High means expensive and low means cheap

Scales are inverted where necessary so up always means more profits

Values in Reverse Order

The way changes are shown on the vertical axis depends on the Asset Class and Timescale of the chart. So as to make charts compatible between asset classes, Investors RouteMap consistently shows a rising trend on the chart as representing an increase in value, specifically upward movement shows that :-

  • Share prices increase, as one would expect.
  • Foreign currencies becomes more valuable compared to the US$. The scale is inverted i.e. one US$ buys less foreign currency. For consistency the exchange rate for the British £ is shown on the same basis, not conventionally. i.e.  £/US$ 1.66 is expressed as US/£ $ 0.60.
  • Bond prices rise. NB When using the conventional method of expressing changes in bond markets in terms of yield (which by definition move inversely to price), the scale on the axis is reversed i.e. the lowest yields representing the highest prices are shown at the top.

The chart alongside shows an example of the price and corresponding yield change for a bond with a 10% coupon. Price is shown on the left hand axis as the thick white line, while the yield is shown in reverse order on the right hand axis as the thin yellow line. The effect of a given yield change on bond price movements is directly proportional in the case of irredeemable bonds but damped the closer the redemption date lies. i.e. a 10% rise in yield from say 5.0% to 5.5% produces a fall in prices of 10% for an irredeemable bond and proportionately less for bonds with shorter maturities. Such very long-term bonds are scarce. However most OECD countries and an increasing number of developed markets have active 10 year government bonds, so these are used throughout as the most suitable proxy for comparisons, even though actual price volatility will be somewhat less. Owing to a spread of maturities, the volatility of a typical portfolio will be considerably less.

 

Logarithmic scales equalise the size of percentage changes at all levels

To avoid misleading impressions logarithmic scales are used where needed to equalise very large percentage changes

Linear and Log Scales

Conventional linear scaling has been used for Seasonal and medium-term charts, but for long-term charts logarithmic scaling has been used to account for the manifold increase in values.

  • Linear scales make it easier to view recent price changes. However this may be misleading if there have been very large cumulative increases over a long time. A setback of a given number of index points from a high level recently would appear to be as great as as the same number of points from a lower level in earlier years, when in fact that earlier decline was worse in percentage terms.
  • Logarithmic scales on the vertical axis represent the very large changes in values that can occur over a long timescale in equal percentage terms. So, for example a 1cm. vertical movement seen on a PC monitor between two low values on one chart represents the same percentage change as a 1cm. movement between two high values elsewhere on the same chart. Similarly a 1cm. movement represents the same percentage change in all the long-term charts of the same type. Changes may appear deceptively small, when in fact a range from 10 to 100 represents a tenfold rise in values on all charts shown with log scales.

The chart alongside shows the difference that the scale makes. Both axes cover the same range but the setback to the two series appears very different. The thick white line uses the log scale on the right hand axis. On the linear scale the thin yellow line using the left hand axis appears to fall much further in the second period and to do so from a lower level, even though the movements are the same in percentage terms.

31/12/1994 = 100

For consistency all series are rebased at 31/12/1994 = 100

Base Date

Bond and stock market indexes and other time series have been rebased at 31/12/94 = 100, so that vertical axes can be easily compared to show changes on a percentage basis. Thus a starting value of 60 indicates that the index was initially 40% lower and a current reading of 130 represents a 30% increase since the base date. NB If series are annual, then 1995=100.

The chart alongside indicates graphically how this works. In the linear charts this method provides compensation for the loss of equal movements on a given percentage change, as it is a simple matter to calculate the percentage differences from a base value of 100.

Every five years the indexes are rebalanced. While changes in relative price performance take care of themselves in adjusting the weights of indexes automatically, that is not the case for changes arising from privatisations, new issues, or stock buy-backs. Where appropriate a constant is applied to the data subsequent to rebalancing so that a continuous record is maintained, based on the base value of 31/12/94 = 100.

Red Signals, Orange Forecasts

Sample colour coding used in charts

Colours Standards

Investors RouteMap contains a common colour coding system to facilitate visual comparisons between charts analysing foreign currency, government bond or stock markets and help you navigate around the site.

  • The Price Index that one wants to analyse is shown as a thick white line, with its values shown on the right hand vertical axis.
  • The Variable that explains its past behaviour is shown in yellow, with its values shown on the left hand vertical axis. Where there are two variables, the other is shown in light green.
  • Our Best Guess as to the future is shown in orange and pink. Where this is a forecast of the variable it is shown as a separate series projecting into the future with its values also on the same left hand axis. Where these are Buy & Sell signals they are red arrows embedded in the price index at the time and place where they occur. Where these are Odds they are shown as values alongside the index.