The backtesting tool allows users to analyze the returns, performance and risk characteristics of their portfolio over several years worth of market activity.
Backtesting provides valuable insights into how a portfolio has performed through different market conditions. By comparing portfolio performance relative to the market, issues related to excessive risk, position sizing and underperformance are highlighted.
Several charts are available, including:
- Portfolio and benchmark returns
- Drawdown periods
- Rolling Sharpe ratio
- Rolling Beta
Backtests are benchamarked against the $SPY ETF by default. However, the benchmark can be changed to any NYSE or NASDAQ stock or ETF. This allows an appropriate benchmark to be chosen based on the given portfolio.
Several key performance and risk metrics are calculated including:
- Sharpe, Calmar and Sortino Ratios
- Compound Annual Growth Rate and Annual Volatility
- Alpha & Beta
The new backtester complements the existing Diversify Portfolio tools by providing additional analytics to help create a lower risk, more robust and ultimately better performing portfolio.
Backtesting your portfolio involves:
- Creating one or more stock portfolios using our Portfolio Analyzer
- Selecting a time span and benchmark within the Backtester
- Running the backtest and analyzing the results
Additional information on the portfolio backtester can be found here.
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