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How to Read a Stock Return Map

A stock return map shows the color-coded percent return for each buy and sell combination for a series of prices. A buy and sell combination is simply one buy price matched with one sell price to yield a return. A profitable buy and sell combination is called a winner and an unprofitable buy and sell combination is called a loser. A winner is shown in green and a loser is shown in red.

A stock return map shows contiguous areas of profitable and unprofitable returns over time for a selected stock. Buying and selling during periods of rising prices produces contiguous green areas on the map while buying and selling as prices fall produces contiguous red areas.

Stock return maps are particularly useful to compare the performance of different stocks with widely varying prices. Because the map unit is percent return and not price, returns are on the same scale for stocks with different prices ranges. Therefore, the performance of a $5 stock and a $500 stock can be easily compared with a stock return map.


Structure of a a Stock Return Map

The buy dates for a selected period are shown on the top and bottom of the map, and the sell dates for the period are shown at along the right side of the map. Each return is color coded according to its magnitude. Light green indicates positive returns less than or equal to 20%. Darker green indicates positive returns greater 20% and less than 50%. Very dark green indicates positive returns greater than 50%. Light red indicates negative returns less than or equal to 20%. Darker red indicates negative returns greater than 20% and less than 50%. Very dark red indicates negative returns greater than 50%.

The map is triangular in shape because a sell date must be after a buy date. Therefore, the first buy date of a price series has the largest number of sell dates. And each succeeding buy date has one less sell date. The last buy date has only one sell date. Similarly, the first sell date has only one buy date. And each succeeding sell date has one more buy date, so the last sell date has the most buy dates.

The number of returns shown on the map is a function of the number of prices in the series and is computed by the following formula:

Number returns = (Number Prices * (Number prices - 1)) / 2.

The sample map includes 15 prices so the number of buy and sell returns is 105, (15 *14) / 2.

The value of each return, ((Sell price - Buy price) / Buy price) * 100, is shown in the appropriate cell on the sample map. A map generated by the Stock Return Map Maker, does not include the numeric values of returns because there are too many returns to make the values visible.


Follow the Buy Dates

To follow the returns for a particular buy date, select its column and examine the returns for each sell date down the column.

Follow the Sell Dates

To follow the returns of a particular sell date, select its row and examine the returns for each buy date across the row.


General Patterns Seen on Stock a Returns Map

Profitable returns (green areas) are associated with buying at relatively low prices and selling at higher prices. The most profitable returns occur when buying at or near price bottoms and selling at or near price tops.

The largest losses (red areas) occur when buying at or near price peaks and selling at or near price lows.

Unbroken areas of green or red represent periods of extended price upsides or downsides. A map with several decades of prices often has alternating areas of green and red resulting from repeating upside an downside price patterns.




Stock Return Map With Majority of Profitable Returns

Apple (AAPL) has rewarded investors with many more profitable (green) returns than unprofitable (red) returns.

Click chart to enlarge it.



Stock Return Map With Majority of Unprofitable Returns

Diana Shipping (DSX) has disappointed investors with many more unprofitable (red) returns than profitable (green) returns.



Click chart to enlarge it.



More Stock Return Maps

Use the Stock Return Map Maker to map your favorite stocks.