Gallery of Examples

This gallery of examples highlights some examples of the tools provided on this site.

  1. Backtest Asset Allocation
  2. Backtest Portfolio Performance
  3. Optimize Portfolio
  4. Asset Correlation
  5. Factor Analysis
  6. Monte Carlo Simulation
  7. Financial Goals Planning
  8. Efficient Frontier
  9. Market Timing - Moving Averages
  10. Market Timing - Relative Strength
  11. Market Timing - Dual Momentum
  12. Market Timing - Adaptive Allocation
  13. Market Timing - Target Volatility

Asset Allocation

Compare historical performance and risk vs. return profile of different asset class allocations and lazy portfolios:

Portfolio #1
  • 60% Total US Stock Market
  • 40% Total US Bond Market
Portfolio #2
  • 40% Total US Stock Market
  • 20% International ex-US Stock Market
  • 10% Real Estate
  • 30% Total US Bond Market

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Portfolio Performance

View and analyze the historical returns of a given portfolio:

  • 40% Vanguard Total Stock Market Index Fund (VTSMX)
  • 20% Vanguard Total International Stock Index Fund (VGTSX)
  • 10% Vanguard REIT Index Fund (VGSIX)
  • 30% Vanguard Total Bond Market Index Fund (VBMFX)

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Optimize Portfolio

Use the portfolio optimizer tool to run optimize portfolios based on mean-variance, conditional value-at-risk (CVaR), or drawdowns, and explore the efficient frontier of the portfolio assets for a given time period.

  • Vanguard Total Stock Market ETF (VTI)
  • iShares S&P SmallCap 600 Values Index Fund ETF (IJS)
  • iShares MSCI EAFE Index Fund ETF (EFA)
  • Vanguard Emerging Markets ETF (VWO)
  • Vanguard REIT ETF (VNQ)
  • iShares Barclays 20 Year Treasury Bond Fund ETF (TLT)
  • iShares Corporate Bond Fund ETF (LQD)
  • SPDR Gold Shares ETF (GLD)

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Asset Correlation

View asset correlations for selected assets. How has the correlation changed over time?

  • Vanguard Total Stock Market ETF (VTI)
  • Vanguard REIT ETF (VNQ)
  • SPDR Gold Shares ETF (GLD)
  • Vanguard Total Bond Market ETF (BND)

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Correlations for the specific portfolio assets
Ticker VTI VNQ GLD BND
Daily correlations from 01/01/2011 to 12/31/2016
VTI - 0.76 -0.02 -0.32
VNQ 0.76 - 0.06 -0.02
GLD -0.02 0.06 - 0.27
BND -0.32 -0.02 0.27 -

Factor Analysis

Run four-factor analysis (Mkt, HmL, SmB, Mom) to see the factor loadings for the specified assets, for example:

  • iShares S&P Small-Cap 600 Value (IJS)
  • iShares Russell 2000 Value (IWN)
  • Guggenheim S&P Smallcap 600 Pure Value (RZV)
  • Vanguard Small Cap Value ETF (VBR)

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Four factor analysis of the selected ETF tickers
Ticker Rm-Rf SMB HML MOM Annual Alpha R^2
Monthly returns regression from 01/01/2011 to 12/31/2016
IJS 0.98 0.77 0.32 -0.04 1.84% 97.2%
IWN 0.97 0.81 0.43 0.04 -0.38% 98.1%
RZV 1.08 1.03 0.35 -0.40 1.09% 93.2%
VBR 1.04 0.51 0.26 0.02 0.12% 97.9%

Monte Carlo Simulation

Use the Monte Carlo simulation tool to see how long a $1,000,000 portfolio with 60% stock and 40% treasury note allocation would survive in retirement with $45,000 inflation adjusted annual withdrawals.


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Financial Goals Planning

Use Monte Carlo simulation to test portfolio growth and survival against specified financial goals both during career and retirement.

  • Save $1,500 per month during career
  • Support college education for one child with $40,000 per year for 4 years
  • Withdraw $3,500 per month during retirement

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Efficient Frontier

Visualize the efficient frontier for any asset classes or funds.

What asset mix has provided the best risk adjusted return historically?

How has the efficient frontier changed from decade to decade?


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Market Timing - Moving Averages

Backtest moving average timing models for a single asset or for a portfolio of assets. For example, test market timing with the S&P 500 index using VFINX with 10-month simple moving average (SMA) from 1990 onwards.


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Market Timing - Relative Strength

How well did momentum based asset class rotation work in the past? Backtest asset class ETF momentum strategy rotating across asset classes based on past 5-month performance:

  • iShares Russell 1000 Index (IWB)
  • iShares Russell 2000 Index (IWM)
  • iShares MSCI EAFE Index (EFA)
  • iShares MSCI Emerging Markets Index (EEM)
  • SPDR Dow Jones REIT (RWR)
  • PowerShares DB Commodity Index Tracking (DBC)
  • SPDR Gold Shares (GLD)
  • iShares Barclays 20+ Year Treasury Bond (TLT)
  • T-Bills/Cash

Compare the results against buy-and-hold portfolios. How would the results change based on different time periods?

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Market Timing - Dual Momentum

Explore dual momentum timing model combining relative momentum with an absolute momentum based trend-following filter:

Momentum Assets:
  • Vanguard 500 Index Fund (VFINX)
  • Vanguard Total International Stock Index Fund (VGTSX)
Fixed Income Asset:
  • Vanguard Total Bond Market Index Fund (VBMFX)

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Market Timing - Adaptive Allocation

Adaptive asset allocation model combining relative strength momentum model with inverse volatility or minimum variance based asset weights.

Hold top two best performing assets with risk parity weighting:

  • Vanguard Total Stock Market Index Fund (VTSMX)
  • Vanguard Total International Stock Index Fund (VGTSX)
  • Vanguard REIT Index Fund (VGSIX)
  • Vanguard Total Bond Market Index Fund (VBMFX)

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Market Timing - Target Volatility

Use target volatility model to keep portfolio within preferred risk tolerance. Compare drawdowns and risk adjusted performance against annually rebalanced buy-and-hold portfolio.

Portfolio assets for 8% annualized volatility target:

  • 40% Vanguard Total Stock Market Index Fund (VTSMX)
  • 20% Vanguard Total International Stock Index Fund (VGTSX)
  • 10% Vanguard REIT Index Fund (VGSIX)
  • 30% Vanguard Total Bond Market Index Fund (VBMFX)

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