Sunday, June 5, 2016

Portfolio Performance - May 2016

In the month of May, portfolio experienced ~5% decline while SP500 return 1.8% including dividends. Even though portfolio under-performed against the SP500, it is still up more than 9% YTD.

Portfolio's YTD performance with daily variation is shown below:

Absolute performance is just one measure of success of any portfolio. there are several other measures used by the finance industry that classify the performance of any portfolio in regards with the amount of risk taken and its correlation to the underlying stock market.

On these measures, the portfolio has outstanding returns. Portfolio's weighted average Beta is -0.05, which means that Portfolio returns are totally uncorrelated with the markets. As a result, portfolio will generate excellent Alpha because the returns are totally independent of the Benchmark returns. Secondly, the portfolio has a Sharpe Ratio of ~3. This shows that the risk adjusted returns are excellent.

Lastly, the portfolio is positioned in a way that it will benefit from upcoming market developments. For example, impact of poor May employment report and its impact of asset classes.

Please note that historical analysis has shows that the model's worst draw down was ~7%. Therefore, it means that we are close to a point where the portfolio will again start to outperform the market.

We will discuss market development in upcoming posts.

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