Performance
Key performance and risk indicators are summarized in a dashboard, along with a calculation widget. The dashboard can be accessed through the menu View > Reports > Performance or with the sidebar (see figure 1). You can customize the dashboard with dozens of widgets.
Please note that the performance and risk indicators are always calculated for the entire portfolio and for a specific reporting period. By default, this is one year from today. You can change the period by selecting a different one or create a new one in the drop-down (top-right). In Figure 1, the reporting period is from Jun 12, 2020 till Jun 12, 2023. For the performance key indicators, the color green indicates a profit, while red signifies a loss.
Key performance indicators
True Time-Weighted Rate of Return (cumulative)
The cumulative True Time-Weighted Rate of Return (TTWROR) is the geometric average of the daily returns within the reporting period. For each day within the reporting period, the daily return is calculated using Equation 1. The cumulative return is computed with Equation 2.
$$\mathrm {r_{daily} = {\frac{MVE + CF_{out}}{MVB + CF_{in}} - 1 {\qquad \text{(Eq 1)}}}}$$
and
$$\mathrm {r_{cum} = [(1 + r_1) \times (1 + r_2) \times ... \times (1 + r_n)] - 1 {\qquad \text{(Eq 2)}}}$$
where MVE = the market value of the asset at the end of day, MVB = the market value at the beginning of the day (or the end of the previous day). CFin and CFout represent the net incoming or outgoing cashflows for the day. When a stock pays a dividend, that's an outgoing cashflow from the stock's perspective. A deposit (for buying the stock) is a cash inflow, as is paying the associated fees.
An in-depth explanation of the TTWOR calculation is given Concepts > Performance > True Time-Weighted Rate of Return. A step-by-step calculation for a very simplified example can be found at View > Reports > Performance > Chart.
Internal Rate of Return (IRR)
The money-weighted rate of return or IRR of a reporting period is the annual interest rate that is necessary to bring the market value of the investment at the beginning of the period (MVB) and all subsequent cash flows to the market value (MVE) at the end of the reporting period. To generate the specified cash flows within the given time period, your portfolio must grow each year by a percentage equal to the IRR. The base formula for the IRR calculation is:
$$\mathrm{MVE = MVB \times (1 + IRR)^{\frac{RD_1}{365}} + \sum_{t=1} ^{n}CF_t \times (1+IRR)^{\frac{RD_t}{365}} \qquad \text{(Eq 3)}}$$
where n = the number of cash flows in the reporting period, $CF_t$ = cash flow at time t within the period, and $RD_t$ = the number of remaining days within the period. For MVB, the $RD_t$ equals the entire period, representing the period length in years. You can simplify the equation by treating the MVB as the initial cash flow. A cash flow is any amount of money that is added to or withdrawn from an investment. For an in-depth explanation, see Concepts > Performance > Money-Weighted Rate of Return.
Absolute Change
The absolute Change is the difference between the market value of the portfolio at the end date of the reporting period (MVE) and the market value at the beginning (MVB).
$$\mathrm{MVE - MVB\qquad \text{(Eq 4)}}$$
For example, in Figure 1 (calculation widget), the absolute change equals the Final Value (426.82 EUR) minus the Initial value (0 EUR).
Delta
The Delta value (for the reporting period) is equal to the Absolute Change (see above) minus the external cash flows that occurred in the period.
$$\mathrm{(MVE - MVB) + \sum_{t=1} ^{n}CF_t {\qquad \text{(Eq 5)}}}$$
For example, the Delta in Figure 1 is 120.82 EUR. This value represents the actual return of securities in the portfolio. The absolute change in the portfolio is partly caused by external cash inflows (306 EUR to buy the securities). This money comes from an external source and should be subtracted from the Absolute change. They are summarized as Performance neutral Transfers in the calculation panel.
Last Day
Last Day: True Time-Weighted Rate of Return
One would assume that the Last Day is the same as the ending day of the reporting period. Unfortunately, it is not. It is the previous trading day before 'today' as can be seen when hovering over the label. Figure 1 is created on December 8, 2023. The market value of the portfolio was at that time 459.31 EUR. The last trading day before this date is 2023-12-07 with a MV = 455.84 EUR. There are no cashflows on the last day.
The TTWOR for that day is given by Eq. 1 or (459.31 - 155.84)/455.84 = 0.76%.
Last Day: Absolute Change
Equation 3 can be used to calculate the Absolute Change of the last day. It's obvious that the value equals 3.47 EUR = 459.31 EUR - 155.84 EUR.
Risk indicators
Risk refers to the possibility of losing some or all of the invested capital or not achieving the expected return from your investment. Several indicators are provided to measure the risk.
Maximum Drawdown
Maximum drawdown (MDD) refers to the largest peak-to-trough decline in the performance of a portfolio or investment over a specific period, typically expressed as a percentage. It measures the extent of loss incurred from the highest point to the lowest point before a new peak is reached.
With View > Reports > Performance > Chart you can create a graph of the cumulative performance of your portfolio, accounts, or specific securities. Figure 1 displays the portfolio performance for the reporting period 2020 - 2023.
The largest drawdown occurs between August 18, 2021 and March 8, 2022. Cumulative performance dropped from 22.04% to - 4.12% (see Figure 2). The MDD for the reporting period of Jun 12, 2020 till June 12, 2023 is 21.44% (see Figure 1). Hovering with the mouse over the value (the label displays the reporting period) will reveal the dates.
Maximum Drawdown Duration
The MDD Duration is the worst or longest amount of time an investment has been between peaks. This is 292 days or between August 18, 2021 and June 6, 2022. The longest recovery period (duration from a low to a peak) is 90 days or between March 8, 2022 and June 6, 2022.
Volatility
Volatility in portfolio performance refers to the degree of variability in the returns of a portfolio over time. It is a measure of the risk or uncertainty associated with the portfolio's future performance. A portfolio with high volatility will have returns that fluctuate widely over time, while a portfolio with low volatility will have returns that are more consistent.
The volatility shown in Figure 2 is 31.33% (refer to Figure 1). It represents the standard deviation of daily returns during the reporting period. To be precise, it is calculated by taking the natural logarithm of (1 + daily return) and then multiplying it by the square root of the total number of days in the reporting period. Notably, weekends and holidays are excluded from this calculation. An efficient method to obtain all the daily returns is by exporting the return/volatility chart as a CSV file.
Semivariance
The Semivariance exclusively considers the negative fluctuations of an investment. The semivariance value is 22.63% (refer to Figure 1), with weekends and public holidays disregarded. Hovering over this value with the mouse provides additional information.
In instances where negative and positive fluctuations are balanced, the formula Volatility (v) = Semi-variance (s) x sqrt(2) applies. For a dataset evenly distributed as depicted in Figure 2, the semivariance would be calculated as follows: s = v / sqrt(2) = 31.33% / sqrt(2) = 22.15%.
Given that the actual semivariance is slightly lower than the estimated semivariance (22.15% < 22.63%), it suggests that the returns are not symmetrically distributed, and the negative returns slightly outnumber the positive ones.