Return analysis is an integral component of the Portfolio Analyser Report, designed to calculate optimum returns of your portfolio holdings and associated risks.
How is it calculated?
- Risk: This is quantified as a 3-year standard deviation of return.
- Return: This is determined as a 3-year mean return.
Understanding the Risk/Return Plot:
- The numbers on the plot represent holdings from the top 10 portfolio holdings list.
- Risk/return analysis is demonstrated based on each holding's risk and return over the past three years.
Points to be remembered as per the above chart:
- The horizontal axis signifies the last three years' standard deviation, while the vertical axis represents the mean of three years.
- Underlying holdings include the top 10 portfolio holdings.
- The Benchmark indicates the optimal risk and return based on the past three years.
- The term 'Portfolio' embodies the overall performance as per the return analysis.
A high standard deviation for a stock implies it is risky, and a high mean indicates a higher return. Conversely, a low standard deviation denotes lower risk, and a low mean signifies a lower return.
For instance, if the benchmark according to the portfolio analyzer is 19.94, and stock 1 displays a Mean of 25 and a Standard Deviation of 37, it indicates that, although stock 1 has outperformed the benchmark in terms of mean returns over the last three years, its high standard deviation also makes it highly volatile and risky.
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