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Asset Class Allocation

Asset Allocation 
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Backtest Portfolio Asset Class Allocation

Asset Class Allocation Overview

This portfolio backtesting tool allows you to construct one or more portfolios based on the selected asset class level allocations in order to analyze and backtest portfolio returns, risk characteristics, drawdowns, and rolling returns. You can compare up to three different portfolios against the selected benchmark, and you can also specify any periodic contribution or withdrawal cashflows and the preferred portfolio rebalancing strategy.

You can also use the portfolio backtesting tool to build and compare portfolios based on specific mutual funds, ETFs, and stocks.

Portfolio Analysis Results (Jan 2004 - Dec 2013)

Large Cap

Asset Class Allocation
US Large Cap 100.00%

Small Cap

Asset Class Allocation
US Small Cap 100.00%

Performance Summary

MetricLarge CapSmall Cap
Start Balance$100,000$100,000
End Balance $202,060 $264,283
Annualized Return (CAGR) 7.29% 10.21%
Standard Deviation14.61%19.61%
Best Year32.18%37.62%
Worst Year-37.02%-36.07%
Maximum Drawdown -50.97% -53.95%
Sharpe Ratio0.450.52
Sortino Ratio0.630.75

Portfolio Growth

   

Annual Returns

Trailing Returns

NameTotal ReturnAnnualized ReturnAnnualized Standard Deviation
3 MonthYear To Date1 year3 year5 year10 yearFull3 year5 year
Large Cap10.46%32.18%32.18%16.00%17.81%7.29%7.29%12.10%15.81%
Small Cap8.79%37.62%37.62%16.45%22.38%10.21%10.21%16.28%20.97%
Trailing return and volatility are as of last calendar month ending December 2013

Risk and Return Metrics

MetricLarge CapSmall Cap
Arithmetic Mean (monthly)0.68%0.98%
Arithmetic Mean (annualized)8.45%12.35%
Geometric Mean (monthly)0.59%0.81%
Geometric Mean (annualized)7.29%10.21%
Standard Deviation (monthly)4.22%5.66%
Standard Deviation (annualized)14.61%19.61%
Downside Deviation (monthly)2.97%3.85%
Maximum Drawdown-50.97%-53.95%
Benchmark Correlation1.000.96
Beta(*)0.961.24
Alpha (annualized)-0.38%0.66%
R299.43%92.67%
Sharpe Ratio0.450.52
Sortino Ratio0.630.75
Treynor Ratio (%)6.868.16
Calmar Ratio0.980.67
Modigliani–Modigliani Measure8.40%9.42%
Active Return-0.71%2.21%
Tracking Error1.27%6.46%
Information Ratio-0.560.34
Skewness-0.86-0.57
Excess Kurtosis2.262.02
Historical Value-at-Risk (5%)7.22%8.93%
Analytical Value-at-Risk (5%)6.26%8.34%
Conditional Value-at-Risk (5%)10.20%12.60%
Upside Capture Ratio (%)93.14134.08
Downside Capture Ratio (%)96.59119.78
Safe Withdrawal Rate11.01%12.73%
Perpetual Withdrawal Rate4.58%7.11%
Positive Periods79 out of 120 (65.83%)77 out of 120 (64.17%)
Gain/Loss Ratio0.770.88
* U.S. Stock Market is used as the benchmark for calculations. Value-at-risk metrics are monthly values.

Annual Returns

YearInflationLarge CapSmall CapUS Large CapUS Small Cap
ReturnBalanceReturnBalance
20131.50%32.18%$202,06037.62%$264,28332.18%37.62%
20121.74%15.82%$152,87318.04%$192,04015.82%18.04%
20112.96%1.97%$131,986-2.80%$162,6841.97%-2.80%
20101.50%14.91%$129,44127.72%$167,37814.91%27.72%
20092.72%26.49%$112,64236.12%$131,05126.49%36.12%
20080.09%-37.02%$89,055-36.07%$96,277-37.02%-36.07%
20074.08%5.39%$141,4041.16%$150,5985.39%1.16%
20062.54%15.64%$134,17615.66%$148,87815.64%15.66%
20053.42%4.77%$116,0287.36%$128,7254.77%7.36%
20043.26%10.74%$110,74019.90%$119,89710.74%19.90%

Drawdowns

Historical Market Stress Periods

Stress PeriodStartEndLarge CapSmall Cap
Subprime CrisisNov 2007Mar 2009-50.97%-53.25%

Drawdowns for Large Cap

RankStartEndLengthRecovery ByRecovery TimeUnderwater PeriodDrawdown
1Nov 2007Feb 20091 year 4 monthsAug 20123 years 6 months4 years 10 months-50.97%
2Jun 2007Jul 20072 monthsSep 20072 months4 months-4.71%
3Jan 2005Apr 20054 monthsJul 20053 months7 months-4.04%
4Jul 2004Jul 20041 monthNov 20044 months5 months-3.31%
5Mar 2004Apr 20042 monthsJun 20042 months4 months-3.07%
6Aug 2013Aug 20131 monthSep 20131 month2 months-2.91%
7May 2006May 20061 monthAug 20063 months4 months-2.90%
8Feb 2007Feb 20071 monthApr 20072 months3 months-1.97%
9Oct 2012Oct 20121 monthJan 20133 months4 months-1.86%
10Aug 2005Oct 20053 monthsNov 20051 month4 months-1.80%
Worst 10 drawdowns included above

Drawdowns for Small Cap

RankStartEndLengthRecovery ByRecovery TimeUnderwater PeriodDrawdown
1Jun 2007Feb 20091 year 9 monthsDec 20101 year 10 months3 years 7 months-53.95%
2May 2011Sep 20115 monthsDec 20121 year 3 months1 year 8 months-24.56%
3Jan 2005Apr 20054 monthsJun 20052 months6 months-8.23%
4May 2006Jul 20063 monthsNov 20064 months7 months-7.91%
5Jul 2004Aug 20042 monthsNov 20043 months5 months-6.21%
6Apr 2004Apr 20041 monthJun 20042 months3 months-4.77%
7Aug 2005Oct 20053 monthsNov 20051 month4 months-4.17%
8Aug 2013Aug 20131 monthSep 20131 month2 months-3.17%
9Jun 2013Jun 20131 monthJul 20131 month2 months-0.99%
10Feb 2006Feb 20061 monthMar 20061 month2 months-0.16%
Worst 10 drawdowns included above

Portfolio Assets

NameCAGRStdevBest YearWorst YearMax DrawdownSharpe RatioSortino Ratio
US Large Cap7.29%14.61%32.18%-37.02%-50.97%0.450.63
US Small Cap10.21%19.61%37.62%-36.07%-53.95%0.520.75

Portfolio Asset Performance

NameTotal ReturnAnnualized Return
3 MonthYear To Date1 year3 year5 year10 year
US Large Cap10.46%32.18%32.18%16.00%17.81%7.29%
US Small Cap8.79%37.62%37.62%16.45%22.38%10.21%
Trailing returns as of last calendar month ending December 2013

Monthly Correlations

NameUS Large CapUS Small CapLarge CapSmall Cap
US Large Cap1.000.941.000.94
US Small Cap0.941.000.941.00

Portfolio Return Decomposition

NameLarge CapSmall Cap
US Large Cap$102,060
US Small Cap$164,283
Return attribution decomposes portfolio gains into its constituent parts and identifies the contribution to returns by each of the assets.

Portfolio Risk Decomposition

NameLarge CapSmall Cap
US Large Cap100.00%
US Small Cap100.00%
Risk attribution decomposes portfolio risk into its constituent parts and identifies the contribution to overall volatility by each of the assets.

Annual Asset Returns

Rolling Returns

Roll PeriodLarge CapSmall Cap
AverageHighLowAverageHighLow
1 year8.12%53.61%-43.32%11.42%74.77%-44.66%
3 years4.95%25.43%-15.18%7.37%33.14%-18.12%
5 years1.98%17.81%-6.73%4.39%23.09%-6.30%
7 years4.39%6.21%2.20%6.72%9.16%4.31%

Annualized Rolling Return - 3 Years

Annualized Rolling Return - 5 Years

  • IMPORTANT: The projections or other information generated by Portfolio Visualizer regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.
  • The results do not constitute investment advice or recommendation, are provided solely for informational purposes, and are not an offer to buy or sell any securities. All use is subject to terms of service.
  • Investing involves risk, including possible loss of principal. Past performance is not a guarantee of future results.
  • Asset allocation and diversification strategies do not guarantee a profit or protect against a loss.
  • Hypothetical returns do not reflect trading costs, transaction fees, commissions, or actual taxes due on investment returns.
  • The results are based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete. Other investments not considered may have characteristics similar or superior to those being analyzed.
  • Refer to the related documentation sections for more details on terms and definitions, methodology, and data sources.
  • Portfolio model information represents a blended portfolio consisting of the model's underlying positions and assigned weights provided by the user and rebalanced at the specified schedule. The results were constructed using net of fee mutual fund performance. Portfolio Visualizer does not provide preferential treatment to any specific security or investment.
  • The results are based on the total return of assets and assume that all received dividends and distributions are reinvested.
  • Compound annualized growth rate (CAGR) is the annualized geometric mean return of the portfolio. It is calculated from the portfolio start and end balance and is thus impacted by any cashflows.
  • The time-weighted rate of return (TWRR) is a measure of the compound rate of growth in a portfolio. This is calculated from the holding period returns (e.g. monthly returns), and TWRR will thus not be impacted by cashflows. If there are no external cashflows, TWRR will equal CAGR.
  • The money-weighted rate of return (MWRR) is the internal rate of return (IRR) taking into account cashflows. This is the discount rate at which the present value of cash inflows equals the present value of cash outflows.
  • Standard deviation (Stdev) is used to measure the dispersion of returns around the mean and is often used as a measure of risk. A higher standard deviation implies greater the dispersion of data points around the mean.
  • Sharpe Ratio is a measure of risk-adjusted performance of the portfolio, and it is calculated by dividing the mean monthly excess return of the portfolio over the risk-free rate by the standard deviation of excess return, and the displayed value is annualized.
  • Sortino Ratio is a measure of risk-adjusted return which is a modification of the Sharpe Ratio. While the latter is the ratio of average returns in excess of a risk-free rate divided by the standard deviation of those excess returns, the Sortino Ratio has the same denominator divided by the standard deviation of returns below the risk-free rate.
  • Treynor Ratio is a measure of risk-adjusted performance of the portfolio. It is similar to the Sharpe Ratio, but it uses portfolio beta (systematic risk) as the risk metric in the denominator.
  • Calmar Ratio is a measure of risk-adjusted performance of the portfolio. It is calculated as the annualized return over the past 36 months divided by the maximum drawdown over the past 36 months based on monthly returns.
  • Downside deviation measures the downside volatility of the portfolio returns unlike standard deviation, which includes both upside and downside deviations. Downside deviation is calculated based on negative returns that hurt the portfolio performance.
  • Risk-free returns are calculated based on U.S. 3-Month Treasury Bill Rate.
  • Inflation is calculated based on U.S. Consumer Price Index.
  • Correlation measures to what degree the returns of the two assets move in relation to each other. Correlation coefficient is a numerical value between -1 and +1. If one variable goes up by a certain amount, the correlation coefficient indicates which way the other variable moves and by how much. Asset correlations are calculated based on monthly returns.
  • Skewness is a measure of the asymmetry of the probability distribution or returns from a normal Gaussian distribution shape about its mean. Negative skewness is associated with the left (typically negative returns) tail of the distribution extending further than the right tail; and positive skewness is associated with the right (typically positive returns) tail of the distribution extending further than the left tail.
  • Excess kurtosis is a measure of whether a data distribution is peaked or flat relative to a normal distribution. Distributions with high kurtosis tend to have a distinct peak near the mean, decline rather rapidly, and have heavy or fat tails.
  • A drawdown refers to the decline in value of a single investment or an investment portfolio from a relative peak value to a relative trough. A maximum drawdown (Max Drawdown) is the maximum observed loss from a peak to a trough of a portfolio before a new peak is attained. Drawdown values are calculated based on monthly returns.
  • Value at Risk (VaR) measures the scale of loss at a given confidence level. For example, if the 95% confidence one-month VaR is 3%, there is 95% confidence that over the next month the portfolio will not lose more than 3%. Value at Risk can be calculated directly based on historical returns based on a given percentile or analytically based on the mean and standard deviation of the returns.
  • Conditional Value at Risk (CVaR) measures the scale of the expected loss once the specific Value at Risk (VaR) breakpoint has been breached, i.e., it calculates the average tail loss by taking a weighted average between the value at risk and losses exceeding the value at risk.
  • Beta is a measure of systematic risk and measures the volatility of a particular investment relative to the market or its benchmark. Alpha measures the active return of the investment compared to the market benchmark return. R-squared is the percentage of a portfolio's movements that can be explained by movements in the selected benchmark index.
  • Active return is the investment return minus the return of its benchmark. For periods longer than 12 months this is displayed as annualized value, i.e., annualized investment return minus annualized benchmark return.
  • Tracking error, also known as active risk, is the standard deviation of active return. This is displayed as annualized value based on the standard deviation of monthly active returns.
  • Information ratio is the active return divided by the tracking error. It measures whether the investment outperformed its benchmark consistently.
  • Gain/Loss ratio is a measure of downside risk, and it is calculated as the average positive return in up periods divided by the average negative return in down periods.
  • Upside Capture Ratio measures how well the fund performed relative to the benchmark when the market was up, and Downside Capture Ratio measures how well the fund performed relative to the benchmark when the market was down. An upside capture ratio greater than 100 would indicate that the fund outperformed its benchmark when the market was up, and a downside capture ratio below 100 would indicate that the fund lost less than its benchmark when the market was down. To calculate upside capture ratio a new series from the portfolio returns is constructed by dropping all time periods where the benchmark return is less than equal to zero. The up capture is then the quotient of the annualized return of the resulting manager series, divided by the annualized return of the resulting benchmark series. The downside capture ratio is calculated analogously.
  • All risk measures for the portfolio and portfolio assets are calculated based on monthly returns.
  • Invesco QQQ is a paid sponsor of the SRL Analytics Tool, Portfolio Visualizer. The model portfolios are for illustrative purposes only and do not constitute a recommendation or suitability for any investor. Inveso is not affiliated with SRL Global.
  • The results assume annual rebalancing of portfolio assets to match the specified allocation.