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1

Overall Risk Metrics

Overall Risk Metrics

Standard Deviation
Beta
Sharpe Ratio
Sortino Ratio

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Standard Deviation: The portfolio's standard deviation is 16.14 , which measures the volatility of the portfolio's returns relative to its average return. Compared to the S&P 500’s standard deviation of 21.30 , the portfolio is less volatile, indicating a more conservative approach. However, the volatility is still significant, reflecting the market environment during the period.

Beta: The portfolio has a beta of 0.75 , suggesting that it is 25% less volatile than the S&P 500. This lower beta indicates that the portfolio is expected to experience smaller fluctuations in value compared to the broader market, making it less susceptible to market downturns but also potentially limiting upside during bull markets.

Sharpe Ratio: The portfolio’s Sharpe Ratio is 0.15 , which is relatively low. This indicates that the portfolio is providing low returns relative to the risk taken. The S&P 500 has a higher Sharpe Ratio of 0.31 , suggesting that the portfolio is not as efficient in generating returns per unit of risk.

Sortino Ratio: The Sortino Ratio, which focuses on downside risk, is 0.40 . This ratio shows how well the portfolio's returns compensate for the downside risk. Compared to the S&P 500's Sortino Ratio of 0.69 , the portfolio has been less effective in managing downside risk.

2

Downside Risk

Downside Risk

Downside Deviation
Downside Capture Ratio

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Downside Deviation: The portfolio’s downside deviation is 11.23 , lower than the S&P 500’s 14.08. This suggests that the portfolio experiences fewer extreme negative returns compared to the broader market, aligning with its lower beta.

Downside Capture Ratio: The portfolio has a downside capture ratio of 0.83 , meaning it captures 83% of the market’s downside when the market is negative. This is a relatively favorable metric, indicating that the portfolio is less sensitive to market declines.

3

Alpha and R-Squared

Alpha and R-Squared

Alpha
R-Squared

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Alpha: The portfolio has a negative alpha of -2.68 , indicating that it has underperformed the market (or its benchmark) by 2.68% after adjusting for risk. This suggests that the portfolio’s returns are lower than what would be expected given its beta, pointing to potentially suboptimal investment choices or market conditions.

R-Squared: The R-squared value is 0.97 , indicating that 97% of the portfolio's movements can be explained by movements in the benchmark index (S&P 500). This high correlation suggests that the portfolio’s performance is closely tied to the broader market.

4

Tracking Error and Information Ratio

Tracking Error and Information Ratio

Tracking Error
Information Ratio

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Tracking Error: The portfolio has a tracking error of 6.20, indicating the volatility of the portfolio's returns relative to the benchmark. A higher tracking error often suggests active management, where the portfolio is not closely tracking its benchmark, potentially leading to larger deviations in performance.

Information Ratio: The information ratio is -0.79, indicating that the portfolio's active management has not added value relative to the benchmark, as the negative ratio shows underperformance after adjusting for the volatility of excess returns.

5

Upside/Downside Capture

Upside/Downside Capture

Upside Capture Ratio
Downside Capture Ratio

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Upside Capture Ratio: The portfolio’s upside capture ratio is 0.64, meaning it captures only 64% of the market’s gains during positive market periods. This is quite low, indicating that while the portfolio is somewhat protected on the downside, it is also not fully capitalizing on market gains.

Downside Capture Ratio: As mentioned, the downside capture ratio is 0.83, showing that the portfolio has been relatively good at mitigating losses during market downturns.

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Risk Perspective Summary

Risk Perspective Summary

Conservative Positioning
Underperformance Relative to Risk
Downside Protection
High Correlation with Market

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Conservative Positioning: The portfolio is conservatively positioned with a beta of 0.75, leading to lower volatility compared to the broader market. However, this also means the portfolio may not fully participate in market upswings, as reflected in the low upside capture ratio.

Underperformance Relative to Risk: The negative alpha and low Sharpe and Sortino ratios indicate that the portfolio is not efficiently compensating for the risk taken. The high tracking error and negative information ratio suggest that active management strategies have not added value, and the portfolio has underperformed its benchmark.

Downside Protection: The portfolio offers some downside protection, as seen in the downside capture and downside deviation metrics. However, this comes at the cost of reduced potential returns during positive market phases.

High Correlation with Market: The high R-squared value shows that the portfolio’s performance is closely tied to the market, indicating that diversification outside of market-correlated assets might be limited.