Highwire includes a broad range of performance and risk calculations, based upon the shareclass prices and dividends. The calculations fall into three broad categories:
Statistics and Calculations
- UCITS KIID: SRRI and Performance calculations (see UCITS KIID module)
- PRIIPs KID / EPT / EMT: SRI, MRM, CRM, Performance Scenarios (see PRIIPs KID module, EPT module, EMT module)
- General risk and performance statistics, as set out below.
Separately, there are cost calculations for UCITS KIID / PRIIPs KID / EPT / EMT purposes.
General Risk and Performance Statistics
| Measure | Summary Explanation |
|---|---|
| Average, Total Return, Rolling Periods | Return is a basic performance indicator used to measure and compare performance of a given asset or portfolio against another, or more commonly against a benchmark. Static return information provides a figure for a given time period (e.g. 1 year), whereas rolling returns consider new information, whilst simultaneously dropping old information. |
| Compound Rate of Return (RoR) | Compound Returns follow on from basic returns, however whilst basic returns provide a measure of performance for a single point in time, compound returns consider holding periods of longer than one and uses compounding to provide a more accurate measure of the asset's return. |
| Variance & Standard Deviation | Variance and Standard Deviation are key measures of risk and volatility. Standard Deviation is simply the square root of variance; it measures the dispersion of data relative to that dataset's mean. The more dispersed the data, the greater the variance and standard deviation. |
| Sharpe Ratio | The Sharpe Ratio compares an asset's excess returns against the level of risk taken. A higher Sharpe Ratio is better, as this implies a greater return with less risk. |
| Sortino Ratio | The Sortino Ratio follows on from the Sharpe Ratio, but considers only downside volatility, as opposed to total volatility. |
| Skewness | Skewness is used to describe the distribution of a dataset. It compares the variance of a dataset relative to a standard normal distribution. A dataset is described as skewed if it is not symmetrical. |
| Kurtosis | Kurtosis is another means of describing a distribution. Whilst Skewness considers which side of the distribution is more heavily weighted, Kurtosis considers how heavily weighted the tails of the distribution are. |
| Capture & Market Percentage Ratio | Capture & Market Percentage Ratio are measures of a portfolio's performance given the market is in an Up or Down market. |
| Active Premium | Active Premium is the most basic measures of excess returns. It simply considers the returns generated above that of the benchmark. A benchmark can be the risk-free rate, or more commonly a selected index. |
| Treynor Ratio | The Treynor Ratio is a measure of risk-adjusted returns. It is similar to the Sharpe & Sortino Ratios, however uses Beta as its denominator. |
| Alpha | Alpha is one of the most widely used performance measures when comparing investment managers against one another, and against their selected benchmark. Alpha measures the excess return generated over the market/benchmark. |
| Beta | Beta is a measure of an asset's correlation relative to the market. If the market portfolio moves by 1 unit, beta is equal to the movement that the asset experiences. |
| Jensen Alpha | Jensen's Alpha is a more robust version of Alpha. Jensen's measure considers excess returns to be in excess of those predicted by the Capital Asset Pricing Model (CAPM). A positive Jensen's Alpha means the portfolio has beaten expected returns. |
| Market Correlation | Up/Down Market Correlation is similar to Beta in that it measures an asset's movement relative to the entire market. However, Up/Down Market Correlation consider movements only in an Up/Down market. |
| Value at Risk (Historical) | Value at Risk (VaR) is a measure of the downside risk, which aims to predict the maximum loss that can be expected in a given day. |
| Excess Returns | Excess Returns are simply the returns earned in excess to the risk-free rate, or to a benchmark rate. For example, a portfolio's benchmark may be the FTSE All-Share, any returns gained over the market rate are considered excess. |
| Maximum Drawdown | Maximum Drawdown is a similar concept to historical VaR, as it considers the maximum we can expect to lose, based off historical data. It is a downside risk percentage figure that we would subtract from the current value. Maximum Drawdown is measured as the maximum loss from peak to trough. |