How to Prepare a Risk Map

A risk map is a geographic visual that details the risk in any market or any segment of any market. Since many people prefer visual representations of statistics, you can use a risk map to prepare an effective presentation for groups.

Instructions

Difficulty: Challenging

1. Identify the market or group of securities that you want to map. You can start with a small group of similar securities, such as the NASDAQ Top 100, or you can specialize by focusing on large businesses in a particular field, such as green energy. You also can compose risk maps for entire markets, such as a stock exchange or currency market.
2. Determine the factors that evaluate the risk for each item that will appear in the map. The risk factors will depend on the type of securities you're mapping, such as stocks or currencies. Then you can take into account other accessible data, such as the ratio of buy-hold-sell ratings from top financial houses or you can use the latest earnings reports to calibrate your risk scale.
3. Set the scale for the risk map you prepare by deciding what changes the relative area of any given security, since all maps deal with area. For example, a common determiner for area is the market capitalization (total size) of a given security when it comes to risk maps for security markets.
4. Check out an interactive, online risk map to see how sophisticated risk maps can be. Maps at places like RiskGrades allow you to change the factors of the risk map so, in effect, you can prepare risk maps that display the kind of information that's relevant to you.