Posted in Finance, Accounting and Economics Terms, Total Reads: 618
It refers to the potential percentage amount by which a financial product (stock) or the market could rise. Upside generally implicates the probability by which there can be an increase in the stock market value and also by approximately how much a particular stock can rise in the near future.
There are various techniques through which upside for the market or the stock or for any portfolio for that matter is evaluated. The analysis that is done falls on either of the two main categories of analysis techniques that is fundamental analysis and technical analysis. The analysis generally tells about the attractiveness (related to investment) of a particular financial instrument or a market. The more the percentage point, the more is the upside for the investment in that financial product or the concerned market.
For example: Let us assume that the upside of a given stock ABC is ‘x’ percentage points and the risk free rate in the given market is ‘y’ percentage points. The investment on the given ABC depends upon the risk free rate that is if the absolute value of ‘x’ is greater than ‘y’ then the investment makes some sense. If the risk free rate ‘y’ is greater than the upside ‘x’ than anyways all the investors can earn the greater return of ‘y’ hence the investment does not make any sense in the stock ABC.
The other example can be of a stock which has grown more than 100% in the past, the upside of that stock in the near future may not be impressive as it already had the long profit and growth period. Hence, a proper analysis is required before making any conclusion on the upside of any financial product or a market.