GBA Workbench – Inverse Volatility Weighted Portfolio

This algorithm calculates portfolio weights proportional to the inverse volatility of each instrument.

The result is a set of portfolio weights where each position has the same level of historical volatility. The weights are recalculated on each re-allocation date.

Parameters chosen for this back test:

  • Inverse Volatility Lookback 3 months
  • Monthly rebalancing

Portfolio:

  • fgovx,Fidelity Government Income Fund
  • sp500tr,S&P 500 Total Return Index

InverseVolatilityPortfolio

Stat                 Inverse Volatility    S&P
-------------------  --------------------  ----------
Start                1988-01-04            1988-01-04
End                  2016-12-20            2016-12-20
Risk-free rate       0.00%                 0.00%

Total Return         632.65%               1593.83%
Daily Sharpe         1.52                  0.64
CAGR                 7.12%                 10.26%
Max Drawdown         -8.06%                -55.25%

MTD                  -0.16%                3.38%
3m                   -1.54%                6.69%
6m                   -0.64%                10.17%
YTD                  2.63%                 13.50%
1Y                   2.81%                 15.74%
3Y (ann.)            3.19%                 9.99%
5Y (ann.)            3.40%                 15.28%
10Y (ann.)           4.53%                 7.06%
Since Incep. (ann.)  7.12%                 10.26%

Daily Sharpe         1.52                  0.64
Daily Mean (ann.)    6.98%                 11.33%
Daily Vol (ann.)     4.58%                 17.69%
Daily Skew           -0.00                 -0.12
Daily Kurt           2.52                  8.86
Best Day             1.48%                 11.58%
Worst Day            -1.98%                -9.03%

Monthly Sharpe       1.60                  0.76
Monthly Mean (ann.)  7.00%                 10.83%
Monthly Vol (ann.)   4.36%                 14.27%
Monthly Skew         0.06                  -0.57
Monthly Kurt         1.20                  1.26
Best Month           5.86%                 11.43%
Worst Month          -3.32%                -16.79%

Yearly Sharpe        1.23                  0.66
Yearly Mean          7.34%                 11.71%
Yearly Vol           5.94%                 17.75%
Yearly Skew          1.27                  -0.83
Yearly Kurt          2.12                  0.77
Best Year            25.19%                37.57%
Worst Year           -2.23%                -37.00%

Avg. Drawdown        -0.60%                -2.18%
Avg. Drawdown Days   17.81                 30.29
Avg. Up Month        1.15%                 3.26%
Avg. Down Month      -0.87%                -3.39%
Win Year %           92.86%                82.14%
Win 12m %            95.85%                81.60%

 

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