What does 'Upside' mean

Upside is the forecasted dollar amount or percentage increase in the price of an investment, and it can be determined using several forms of analysis. Analysts used either technical analysis or fundamental analysis techniques to predict the future price of an investment, particularly stock prices. A higher upside means that the stock has more value than is currently reflected in the stock price.

BREAKING DOWN 'Upside'

Fundamental analysis evaluates the upside price of a stock by considering the ability of the firm to generate sales and earnings and to make smart decisions about company assets. Businesses can increase sales by moving into new markets or by adding a product line. Companies that manage their costs well and can increase their profit margins have a higher upside. Money managers that use fundamental analysis also consider how effectively a business uses assets to generate sales and profits.

Factoring in Technical Analysis

Technical analysis is a method that considers the historic patterns in the price of a stock and in the trading volume of a security. Technical analysts believe that price movements are trends, and these managers use charts to determine the upside in a stock’s price. A breakout, for example, occurs when a stock price trades above a recent price trend. If XYZ stock has been trading between $20 and $25 per share, for example, a price move to $28 is a breakout, which is an indication that the stock price has an upside above $28.

How Upside Capture Ratio Works

Upside is also a concept that is used to judge the success of a portfolio manager’s performance when compared to a benchmark. For many mutual funds, the investment objective is to outperform a specific benchmark, such as the Standard & Poor’s 500 index. The upside capture ratio indicates how much upside the mutual fund captures when compared to the benchmark. Ideally, an investor wants a mutual fund that captures 100% or more of the benchmark’s upside gains with a lower level of risk.

Examples of Short Selling

Short selling refers to selling stock that the investor does not own, and the seller must delivered borrowed securities to the buyer by the settlement date. Eventually, the short seller must buy the shares to cover the short position, and the seller’s goal is to buy back shares at a lower price. Short sellers look for stocks that have reached an upside, which means that the stock is forecast to decline in price.

RELATED TERMS
  1. Outperform

    An analyst recommendation meaning a stock is expected to do slightly ...
  2. Stock Analysis

    Stock analysis is a term that refers to the evaluation of a particular ...
  3. Technical Analysis of Stocks and ...

    The academic study of historical chart patterns and trends of ...
  4. Benchmark

    A standard against which the performance of a security, mutual ...
  5. Valuation

    The process of determining the current worth of an asset or company. ...
  6. Short Interest Ratio

    A sentiment indicator that is derived by dividing the short interest ...
Related Articles
  1. Investing

    How Mutual Funds Affect Stock Prices

    Find out how mutual fund trading activity -- and that of other institutional investors -- impacts stock prices, including both short and long-term effects.
  2. Trading

    Short Sales For Market Downturns

    This strategy can help in market downturns, but it's not for inexperienced traders.
  3. Insights

    A Breakdown on How the Stock Market Works

    Learn what it means to own stocks and shares, why shares exist, and how you buy and sell them.
  4. Trading

    The Short Squeeze Method

    The short squeezed strategy can be risky - but also very rewarding - for those who master it.
  5. Investing

    How The Stock Market Works

    When you buy a stock, you buy a piece of a company.
  6. Trading

    Short Interest: What It Tells Us

    This figure can be a real eye-opener about the market sentiment surrounding a given stock.
  7. Investing

    Short Selling Risk Can Be Similar To Buying Long

    If more people understood short selling, it would invoke less fear, which could lead to a more balanced market.
  8. Trading

    Use Price Action Trading Strategy for Results

    Bored by the fixed rules of technical and fundamental analysis? Price action trading allows you to customize your own trading strategy.
RELATED FAQS
  1. How is it possible to trade on a stock you don't own, as is done in short selling?

    Understand how the process of short selling allows a person to sell a stock he or she doesn't technically own by borrowing ... Read Answer >>
  2. Is it better to use fundamental analysis, technical analysis or quantitative analysis ...

    Understand the difference between fundamental, technical and quantitative analysis, and how each measurement helps investors ... Read Answer >>
  3. Under what circumstances is short selling advisable?

    Find out when short selling a stock is profitable and what an investor should keep in mind before deciding to pursue a short ... Read Answer >>
  4. Can you place a stop-loss order on a mutual fund?

    First, remember that a stop-loss order is a limit order placed with a broker to sell a stock when it reaches a certain price. ... Read Answer >>
  5. How does somebody make money short selling?

    Short selling is a fairly simple concept: you borrow a stock, sell the stock and then buy the stock back to return it to ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center