Quant charts explained: Drawdown Analysis

Shows the historical drawdown of a portfolio(s) against a specified benchmark

What does the chart show?

Drawdown is the cumulative peak-to-trough of loss over time. This chart is useful in analysing the frequency, size and length (time) of drawdowns, and the analysis can be done on an absolute basis or relative to a specified benchmark.

How to interpret the chart

It is ideal to have fewer, smaller and shorter (time) drawdowns. Portfolios with higher allocation in growth assets will have more frequent and bigger drawdowns.

When to use the chart

This chart is used to assess the historical drawdown of a portfolio, compared against a specified benchmark. From the historical drawdown, the defensiveness of a portfolio can be evaluated.

 

Please note the Drawdown Analysis chart is only available in the Portfolio Construction tool, within Portfolio Comparison.

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