- Total return: the total return of the portfolio over the period. This includes dividends (whether re-invested or paid to cash position).
- Annualized return: the total return, adjusted to give a comparable one-year return.
- Max drawdown: the largest peak-to-trough decline observed during the period, with the duration and the recovery (if applicable)
- Current yield: the weighted sum of the current yields of each position. Click on the magnifier icon to display the yield contribution of each portfolio position.
- Risk: the annualized standard deviation of the monthly returns (for period of 1 year or more) or weekly returns (for period less than 1 year)
- Sharpe ratio: compares the portfolio return against the risk-free return (identified as the historical timeseries of the US 90 days treasury bill), adjusted for risk. The greater the Sharpe ratio, the better its risk-adjusted performance.
If for example two portfolios have achieved the same returns but with different levels of volatility, the portfolio with less volatility will have a better (higher) Sharpe ratio. Negative Sharpe ratios may occur in bear markets. When Sharpe ratios are negative, they are no longer suitable to compare funds.
- Sortino ratio: this ratio is a modification of the Sharpe ratio, using downside deviation for the risk adjustment instead of standard deviation. The downside deviation only considers the periods of negative returns.
- Alpha: the excess return of the portfolio over a benchmark (*), after adjusting for risk (beta). A positive value of alpha implies that the portfolio has performed better than expected, relatively to its risk. The higher the alpha, the better. This measure is annualized if the backtest period is more than one year.
- Beta: the volatility of the portfolio with respect to a benchmark (*). A value lower than 1 indicates that the portfolio is less volatile than the market. A value greater than 1 indicates that the portfolio is more volatile than the market.
Low betas are preferred by conservative investors. High betas are preferred by investors who can tolerate more risk.
- Information ratio: similar to the Sharpe ratio, but the comparison is made against a benchmark (*). The information ratio is equal to the alpha of the portfolio divided by the residual risk (which is the risk of the return which is independent of the market). Because it is relative to a benchmark, the information ratio is commonly used as a measure of success for portfolio managers.
Below are information ratio values which are convenient to remember:
- 0 or negative: Average or below average (50% of managers)
- 0.5: Good (top 25% of managers)
- 1.0: Exceptional (top 10% of managers)
By definition, the information ratio of the benchmark is 0.
- Up/Down capture ratio: represent how much the portfolio participated in the moves, up or down, of a benchmark reference (*). An up capture ratio greater than 1 is desirable: it means that on average the portfolio manager had higher returns than the benchmark in months when the benchmark had positive returns. Conversely, a down capture ratio lower than 1 is desirable as the manager captured less of the market downside.
To calculate the up capture ratio, first the months in which the benchmark had a positive return are identified. The ratio is obtained by dividing the geometric average monthly return for the portfolio during these months, by the geometric average monthly return of the benchmark during these months.
Similarly, the down capture ratio is calculated using the months in which the benchmark had negative returns.
(*) Benchmark for ratio calculation
The following statistics are calculated relative to a benchmark: Alpha, Beta, Information ratio, up/down capture ratio. By default, the benchmark is the S&P500 Index Total Return.
You can change the benchmark used in the ratio calculation by clicking on the edit icon next to the benchmark name. The change is applied to all porfolios in the current view.