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How does the Capital4 Community work?

  • Tell me how it works in simple words

  • All registered members can start picking/rating stocks on Capital4.com. Each stock pick is measured for its performance - the performance is measured in terms of the returns made by the stock over and above the corresponding NIFTY returns (Excess returns). Members are 'rated' based on 3 parameters - Performance, Accuracy and Activity level - to come up with a Capital4 Investor Rating.

  • Tell me more about Member Rating and Stock Rating

  • How does Capital4 work in the background?

    • Members rate stocks: Members make predictions if a stock will outperform (Buy pick) or underperform (Sell pick) the NIFTY. Members are individuals like you OR Dalal street brokersOR the friendly face you see on television who makes stock picks. At Capital4 we track all "Professionals" and record their picks so you can track their strategies and follow the better performing ones.
    • Members score points: The picks members make are scored. The score for each pick is the % outperformance over the NIFTY of that stock (underperformance if it is a short pick). The cumulative sum of all pick points is attributed to the Capital4 Member.
    • Members are rated: Members are rated based on their overall score, their accuracy and their level of activity (on a scale of 1 to 100, 100 being the best score)
    • Stocks receive Capital4 Ratings: A stock receives a rating based on the number and quality of Members who have picked that stock. Higher-rated members have greater influence on a stock's ratings. So, if you consistently are rated in the 90+ rating category, your picks are more likely to influence a stock's rating than the prime-time astrologer who also makes stock picks.
    • Members use the community for better investment ideas: As a result of this meritocracy and multiple other features (Recommending blogs & comments, Family of stocks etc), Members can now milk Capital4 to get better investment ideas from the smartest investors in the community.

  • When do I get a Capital4 Rating?

  • To receive a CAPITAL4 rating, you must maintain 4 active picks. Picks that you have ended/closed do not count towards this minimum.

  • How is a member's Capital4 Rating calculated?

  • A member's Rating is based on 3 parameters - Profitability Score, Accuracy and Activity.

    • Profitability Rating: For each pick, you are awarded 'points' which is the % outperformance of the stock over the NIFTY (Stock Return minus NIFTY Return). The sum of points you make on all picks is your Total Score. We now sort all members based on score and give them percentile ranks. That percentile rank is the Profitability Rating.
    • Accuracy Rating: Then, we do the same with accuracy with one major tweak. Members are ranked on stock returns accuracy and outperformance accuracy based on the PROBABILITY of achieving that accuracy and not the actual accuracy. For example, a member who makes 85 out of 100 correct predictions will be ranked ahead of a member who makes 9 out of 10 correct because it is much more difficult to be correct 85 times out of 100.
    • Activity Rating: Finally, we measure the contribution of each member to the community based on Number of Picks, Number of relevant stock pitches (comments) written and Last Activity Date.


    The final rating formula we use is:
    Raw Rating = (45% * Profitability Rating) + (35% * Accuracy Rating) + (20% * Activitity Rating).

    We now sort Members on the basis of Raw Rating, give them a percentile score and this percentile score will become their Capital4 Rating. Phew!

  • How are pick points calculated?

  • Pick points = (Stock Returns - Index Returns) * 100

    For an active long pick:
    Stock Returns = (Current Stock price - Pick start stock price + Value of dividends) / (Pick start stock price)
    Index points = (Current Index level - Pick start index level) / (Pick start index level)

    Pick start stock price and Pick start index level are stock and index levels at the time you made the pick.

    For a short pick, both the above formulas for Stock points and Index points are multiplied by -1.

    For an inactive (closed) pick, the stock and index levels at the time of closing out the pick are used instead of current levels.

  • What is my accuracy?

  • Your accuracy is a measure of how often you make correct predictions. At Capital4, there are 2 types of accuracy. The first being, the percentage of your stock picks that have made positive stock returns. The second is the percentage of your stock picks that have made outperformed the NIFTY (picks that reflect positive excess returns or positive net points).

    To calculate accuracy we take the number of accurate picks divided by your total number of picks. Using the definitions above, we calculate both RAW ACCURACY (accuracy based on stock returns) and OUTPERFORMANCE ACCURACY (accuracy based on excess returns)

  • What is raw accuracy and outperformance accuracy?

  • Your accuracy is a measure of how often you make correct predictions. At Capital4, there are 2 types of accuracy. The first being, the percentage of your stock picks that have made positive stock returns. The second is the percentage of your stock picks that have made outperformed the NIFTY (picks that reflect positive excess returns or positive net points).

    To calculate accuracy we take the number of accurate picks divided by your total number of picks. Using the fedinitions above, we calculate both RAW ACCURACY (accuracy based on stock returns) and OUTPERFORMANCE ACCURACY (accuracy based on excess returns)

  • What is my average score per pick?

  • Your "Average Score" is simply your total score divided by your total number of picks (active and closed). This number represents the amount which your average pick is beating/losing to the market.

  • How does a stock get its Capital4 Rating?

  • The basic principle is: If a highly rated member goes long (or short) a stock then this action will affect the rating of a stock more than when a lowly rated member goes long (or short) the stock.

    This way, we make sure that the community opinion is biased towards the wise elders who are raking in points by making the correct calls.

    The actual formula for how we do this is a burdensome secret that only the founding members of the priory share!