Yes, what you proposed will work, but is a bit convoluted.
OK this is what I did in its most basic form when I first began (it can get more complicated later if you want),
I will explain exactly how I constructed it in excel.....
I start out with a base number (which is the number that price will pivot around).
It can be any number really, but I generally used 1000 (it can be thought of as $1000 if you like)
Divide the number of stocks in your index, into the base number (so for instance if you have four stocks in the index it is 1000/4=250 , or $250 allocated to each stock)
Next you need to choose the base shareprice of the first stock in the index, I suggest to start with just use the first closing price in your data set, that is the oldest price in your data set (this is somewhere a more complicated calculation could be used later if required, if you wanted to be more accurate).
Divide that shareprice into 250, which will give you the number of shares that will be represented by that stock in your index.
So for instance say the first closing price you have is $1.00, it will be 250/1.00=250 .
Project all the prices forward, eg- the first day will be the closing price on the first day in your data set, so it will be 250*1.00=250, then perhaps the closing price was 1.05 on the second day, so it will be 250*1.05=262.50, and so forth up to the most recent day in your data set.
Do this for each stock on the index
Then add together all the prices for each day for all four stocks, and use that as the line chart.
On my charts I do 200 days of data, and chart the last 100 days of price action.
This will give you a line chart of the closing price of the four stocks, as an equal price weighted index, for the last 100 days (or whatever period you choose).
If you want to do a bar chart, you will need to repeat the process for the High, and then the Low as well, so you can make a High Low and Close chart.
And if you want a candlestick chart, you will also need to do it for the Open as well.
For volume, I first take the total volume for the period...say it is a day
If the total volume for each day was a million shares traded, and there is four stocks in the index (which is a quarter or 25% of the total), I would use a quarter of the total volume traded for the day, for each stock, on each day (if there were 10 stocks in the Index, I would use 10% of the volume for the period).
Do the same for all stocks in the index, and add them all together for total volume traded each day, and then project each total forward up to the mosr recent day.
Sounds more complicated than it actually is.....
(it can be done more complicated, or more accurate than that, this is the most basic form I used, and to be honest, the more complicated forms did not make very much difference overall).
Interestingly, if price on the Index increases to 1100, then effectively, if you held equal quantities of exch stock, over the period of the data, you would be up 10%.
and if it is down to 800, you would have lost 20%
can you follow that ??
cheers
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