The Common and Advanced Benchmarks sections within the Result Analysis module of FinStudio provide a comprehensive suite of metrics for evaluating and comparing trading strategies against various benchmarks. These sections offer detailed insights into multiple aspects of strategy performance, helping traders make informed decisions based on robust statistical analysis.

Common Benchmarks

Portfolio Statistics

This section provides a statistical analysis of the strategy's monthly and daily returns, including:

• Month Count: Number of months included in the analysis.
  
  
• Years: Number of years included in the analysis.
  
  
• Mean Return: The average return value.
  
  
• Annualized Return: The geometric average amount of money earned by the strategy each year over a given time period.
  
  
• Variance: The average squared deviation of returns from the mean.
  
  
• Standard Deviation: The square root of the variance.
  
  
• Annualized Risk: The annualized standard deviation of returns.
  
  
• Skewness: A measure of the distortion or asymmetry of the return distribution.
  
  
• Kurtosis: A measure of the combined weight of a distribution's tails relative to the center.
  
  
• Bera-Jarque Statistic (BJ): A goodness-of-fit test for normal distribution.
  
  
• Covariance: Measures the directional relationship between portfolio and benchmark returns.
  
  
• Correlation: Measures the tendency of portfolio and benchmark returns to move together.
  
  
• Up/Down Capture Indicators: Measure the portfolio's performance in positive and negative markets.
  
  
• Up/Down Number Ratios: Percentage of periods where portfolio returns exceed zero when benchmark returns are positive/negative.
  
  
• Up/Down Percentage Ratios: Percentage of periods where portfolio excess returns against the benchmark are positive.
  
  
• Percentage Gain Ratio: The ratio of positive portfolio returns to positive benchmark returns.
  
  
• Rescaled Range: The range of cumulative deviations from the mean, scaled by standard deviation.
  
  
• Hurst Index: Detects if returns are mean-reverting, random, or persistent.
  
  
• Bias Ratio: Ratio of returns closely exceeding zero to those slightly less than zero.

Advanced Benchmarks

Regression Statistics

These metrics provide insights into the relationship between portfolio and benchmark returns:

• Regression Alpha: Excess return of the portfolio over the expected return.
  
  
• Regression Beta: Portfolio sensitivity to the benchmark.
  
  
• CAPM Beta: Systematic risk of the portfolio relative to the benchmark.
  
  
• Jensen's Alpha: Excess return adjusted for systematic risk.
  
  
• Bull/Bear Beta: Portfolio sensitivity during positive/negative market periods.
  
  
• Beta Timing Ratio: Performance in different market conditions.
  
  
• R Squared (R²): Degree of diversification.
  
  
• Treynor Ratio: Uses systematic risk instead of total risk.
  
  
• Appraisal Ratio: Uses Jensen’s alpha and specific risk.
  
  
• K-Ratio: Reward-to-risk based on cumulative returns.

Risk Statistics

These metrics analyze the risk-adjusted performance of strategies:

• Sharpe Ratio: Return of an investment compared to its risk.
  
  
• Roy Ratio: Similar to Sharpe, but uses minimum target return.
  
  
• Downside/ Upside Risk: Variability of returns below/above a target.
  
  
• Sortino Ratio: Uses downside risk instead of total risk.
  
  
• Omega Ratio: Gain-loss ratio incorporating higher moments.
  
  
• MAD Ratio: Uses mean absolute deviation.
  
  
• Skewness-Kurtosis Ratio: Distortion and weight of return distribution tails.
  
  
• M Squared: Risk-adjusted return comparison.
  
  
• Information Ratios: Evaluate performance relative to a benchmark.
  
  
• Adjusted Sharpe Ratio: Penalizes for skewness and kurtosis.
  
  
• Tracking Errors: Divergence between portfolio and benchmark.
  
  
• Upside Potential Ratio: Measures returns above a target.
  
  
• Adjusted M Squared: Uses Adjusted Sharpe Ratio.

Extreme Risk Analysis

Focuses on potential extreme risks in a portfolio:

• Value at Risk (VaR): Worst expected loss over a time interval.
  
  
• Historical/Parametric VaR: Based on historical returns or normal distribution.
  
  
• Gain at Risk (GaR): Best expected win over a time interval.
  
  
• Modified VaR: Adjusted for kurtosis and skewness.
  
  
• Conditional VaR (CVaR): Average return below VaR.
  
  
• Reward to VaR/Double VaR: Uses VaR for risk measurement.
  
  
• Tail Risk/Ratio: Measures extreme returns in the distribution tail.
  
  
• Rachev Ratio: Gain-loss ratio with tail gain and conditional VaR.
  
  
• Drawdown at Risk (DaR)/CDaR: Ranks and averages continuous negative returns.
  
  
• Reward to Conditional DaR: Uses CDaR for risk measurement.

Drawdown Analysis

Analyzes the severity and frequency of portfolio losses:

• Drawdown Deviation: Standard deviation of individual drawdowns.
  
  
• Ulcer Index: Combines time underwater with drawdown depth.
  
  
• Pain Index: Average depth of drawdowns.
• CALMAR Ratio: Uses maximum drawdown.
  
  
• Sterling Ratio: Uses average drawdown.
  
  
• Burke/Modified Burke Ratio: Penalizes major drawdowns.
  
  
• Martin Ratio: Uses the Ulcer Index.
• Pain Ratio: Uses the Pain Index.

Summary

The Common and Advanced Benchmarks sections provide traders with a comprehensive view of their strategy's performance relative to benchmarks. By leveraging these detailed insights, traders can make data-driven decisions, refine their strategies, and optimize their trading outcomes. These metrics collectively help in understanding the risk, return, and overall performance of trading strategies, providing a robust framework for effective portfolio management.