This widget should be used to visualize the backtested performance of the portfolio.
No filter (all positions included):
The visualization represents the portfolio’s total return that would have resulted from holding all current positions from a point in the past (normally 3 years in our templates) to today. If the security didn’t exist at the start date of the backtest, its equivalent dollar allocation is considered to be in cash. Also, the value of foreign securities are converted to dollar each day by the then prevailing FX. The backtest uses the split-adjusted closing prices for each security. It is still not factoring the dividends when they are paid. This is a feature that will be released soon.
The graph contains the portfolio’s total return in dark blue and an index in grey (the default index is SP500).
Moving your mouse over the graph, enables a popup menu with the following information:
- Date: the date in the past we are hovering the mouse over.
- No Filter: The total return for all the securities in the portfolio.
- Filtered Positions: The contribution to total return from a subset of securities (explained below).
- Index: The total return for the relevant index, or asset proxying an index.
- Difference: The difference between the performance of all securities and the filtered subset, plotted as a shaded blue area.
Filtered Positions will differ from No Filter only when there is an active filter selecting parts of the portfolio, otherwise it contains same information and Difference is zero. More on filters below.
Both Filtered Positions and No Filter contain 2 components in their total return calculation, namely:
- Return : This is the total return, including both unrealized gains/losses and cumulative realized PL from the option roll.
- Option Roll: When applicable, Everysk instantiates option(s) at start-date with similar time to expiration and moneyness than the option(s) actually held in the portfolio. It then monitors a roll program, whereby they are rolled into similar option(s) on expiration dates. The market value of the option is used from the last roll date to today to compute the unrealized PL of the option. For historical roll dates, the intrinsic value of the option is used to compute the cumulative realized PL.
Separating the contribution to total return from the options in the portfolio, enables asset managers to gauge the possible upside versus decay costs.
Sometimes we will activate certain filters (see our blog postings on filters: part I and part II) to isolate the contribution from specific parts of the portfolio. A filter to retrieve the positions most exposed to oil was used as a pre-processing phase in the visualization above. The light blue graph indicates the contribution to portfolio’s total return from those positions only. The shaded blue area indicates the difference between all the positions and selected positions.