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 Model Configuration

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Asset Allocation
US Stock Market
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US Large Cap
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US Large Cap Value
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US Large Cap Growth
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US Mid Cap
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US Mid Cap Value
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US Mid Cap Growth
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US Small Cap
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US Small Cap Value
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US Small Cap Growth
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US Micro Cap
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Global ex-US Stock Market
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Intl Developed ex-US Market
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International ex-US Small Cap
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International ex-US Value
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European Stocks
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Pacific Stocks
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Emerging Markets
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Cash
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Short Term Treasury
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Intermediate Term Treasury
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10-year Treasury
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Long Term Treasury
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Total US Bond Market
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TIPS
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Global Bonds (Unhedged)
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Global Bonds (USD Hedged)
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Short-Term Investment Grade
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Corporate Bonds
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Long-Term Corporate Bonds
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High Yield Corporate Bonds
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Short-Term Tax-Exempt
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Intermediate-Term Tax-Exempt
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Long-Term Tax-Exempt
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REIT
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Gold
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Precious Metals
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Commodities
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Total
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Portfolio Analysis Results (Jan 1998 - Dec 2004)

US Stock Market

Asset Class Allocation
US Stock Market 100.00%
Save portfolio »

US Mid Cap

Asset Class Allocation
US Mid Cap 100.00%
Save portfolio »

Performance Summary

PortfolioInitial BalanceFinal BalanceCAGRStdevBest YearWorst YearMax. DrawdownSharpe RatioSortino RatioMarket Correlation
US Stock Market$10,000$14,195 5.13% 17.38%31.35%-20.96%-44.11% 0.190.251.00
US Mid Cap$10,000$20,530 10.82% 18.36%34.14%-14.61%-24.36% 0.470.700.91

Portfolio Growth

   

Annual Returns

Trailing Returns

NameTotal ReturnAnnualized ReturnAnnualized Standard Deviation
3 MonthYear To Date1 year3 year5 yearFull3 year5 year
US Stock Market10.31%12.52%12.52%5.32%-1.44%5.13%14.88%16.64%
US Mid Cap14.84%20.35%20.35%11.30%10.13%10.82%15.38%17.84%
Trailing return and volatility are as of last full calendar month ending December 2004
Notes and Disclosures
  • 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.
  • 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.
  • Risk-free returns are calculated based on the Federal Reserve 3-Month Treasury Bill (secondary market) rates.
  • 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.
  • 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.
  • The results assume annual rebalancing of portfolio assets to match the specified allocation.

Annual Returns

YearInflationUS Stock MarketUS Mid CapUS Stock MarketUS Mid Cap
ReturnBalanceReturnBalance
19981.61%23.26%$12,3269.90%$10,99023.26%9.90%
19992.68%23.81%$15,26215.32%$12,67323.81%15.32%
20003.39%-10.57%$13,64818.10%$14,967-10.57%18.10%
20011.55%-10.97%$12,151-0.50%$14,892-10.97%-0.50%
20022.38%-20.96%$9,604-14.61%$12,716-20.96%-14.61%
20031.88%31.35%$12,61634.14%$17,05831.35%34.14%
20043.26%12.52%$14,19520.35%$20,53012.52%20.35%

Risk and Return Metrics

MetricUS Stock MarketUS Mid Cap
Arithmetic Mean (monthly)0.54%1.00%
Arithmetic Mean (annualized)6.73%12.69%
Geometric Mean (monthly)0.42%0.86%
Geometric Mean (annualized)5.13%10.82%
Standard Deviation (monthly)5.02%5.30%
Standard Deviation (annualized)17.38%18.36%
Downside Deviation (monthly)3.52%3.45%
Maximum Drawdown-44.11%-24.36%
Stock Market Correlation1.000.91
Beta(*)1.000.97
Alpha (annualized)0.00%5.69%
R2100.00%83.70%
Sharpe Ratio0.190.47
Sortino Ratio0.250.70
Treynor Ratio (%)3.259.02
Calmar Ratio0.190.46
Active Return0.00%5.69%
Tracking Error0.00%7.44%
Information RatioN/A0.77
Skewness-0.63-0.55
Excess Kurtosis0.230.38
Historical Value-at-Risk (5%)8.85%7.48%
Analytical Value-at-Risk (5%)7.71%7.72%
Conditional Value-at-Risk (5%)10.81%10.77%
Upside Capture Ratio (%)100.00111.37
Downside Capture Ratio (%)100.0089.58
Safe Withdrawal Rate16.38%18.76%
Perpetual Withdrawal Rate2.61%7.61%
Positive Periods49 out of 84 (58.33%)49 out of 84 (58.33%)
Gain/Loss Ratio0.931.14
* US stock market is used as the benchmark for calculations. Value-at-risk metrics are monthly values.

Drawdowns

Historical Market Stress Periods

Stress PeriodStartEndUS Stock MarketUS Mid Cap
Russian Debt DefaultJul 1998Oct 1998-17.57%-20.40%
Dotcom CrashMar 2000Oct 2002-44.11%-24.36%

Drawdowns for US Stock Market

RankStartEndLengthRecovery ByRecovery TimeUnderwater PeriodDrawdown
1Sep 2000Sep 20022 years 1 month-44.11%
2Jul 1998Aug 19982 monthsNov 19983 months5 months-17.57%
3Apr 2000May 20002 monthsAug 20003 months5 months-8.44%
4Jul 1999Sep 19993 monthsNov 19992 months5 months-6.42%
5Jan 2000Jan 20001 monthMar 20002 months3 months-4.18%
6Feb 1999Feb 19991 monthMar 19991 month2 months-3.73%
7May 1998May 19981 monthJun 19981 month2 months-2.71%
8May 1999May 19991 monthJun 19991 month2 months-2.00%

Drawdowns for US Mid Cap

RankStartEndLengthRecovery ByRecovery TimeUnderwater PeriodDrawdown
1Apr 2002Sep 20026 monthsOct 20031 year 1 month1 year 7 months-24.36%
2Apr 1998Aug 19985 monthsApr 19998 months1 year 1 month-22.10%
3Sep 2000Sep 20011 year 1 monthMar 20026 months1 year 7 months-19.33%
4Jul 1999Sep 19993 monthsNov 19992 months5 months-8.30%
5Apr 2000May 20002 monthsAug 20003 months5 months-4.76%
6Jul 2004Jul 20041 monthOct 20043 months4 months-4.61%
7Mar 2004Apr 20042 monthsJun 20042 months4 months-4.28%
8Jan 2000Jan 20001 monthFeb 20001 month2 months-2.83%
9Jan 1998Jan 19981 monthFeb 19981 month2 months-1.75%

Portfolio Assets

NameCAGRStdevBest YearWorst YearMax DrawdownSharpe RatioSortino RatioMarket Correlation
US Stock Market5.13%17.38%31.35%-20.96%-44.11%0.190.251.00
US Mid Cap10.82%18.36%34.14%-14.61%-24.36%0.470.700.91

Portfolio Asset Performance

NameTotal ReturnAnnualized Return
3 MonthYear To Date1 year3 year5 year
US Stock Market10.31%12.52%12.52%5.32%-1.44%
US Mid Cap14.84%20.35%20.35%11.30%10.13%
Trailing returns as of last calendar month ending December 2004

Monthly Correlations

NameUS Stock MarketUS Mid CapUS Stock MarketUS Mid Cap
US Stock Market1.000.911.000.91
US Mid Cap0.911.000.911.00

Portfolio Return Decomposition

NameUS Stock MarketUS Mid Cap
US Stock Market$4,195
US Mid Cap$10,530
Return attribution decomposes portfolio gains into its constituent parts and identifies the contribution to returns by each of the assets.

Portfolio Risk Decomposition

NameUS Stock MarketUS Mid Cap
US Stock Market100.00%
US Mid 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 PeriodUS Stock MarketUS Mid Cap
AverageHighLowAverageHighLow
1 year4.96%42.16%-28.79%11.18%48.50%-23.54%
3 years-2.58%12.16%-16.27%7.12%18.59%-5.31%
5 years-0.46%3.61%-3.86%8.31%12.31%1.84%

Annualized Rolling Return - 3 Years

Annualized Rolling Return - 5 Years