Using Analyze : Predicted Risk
Easily identify trends, spikes, and outliers in your portfolio’s predicted risk over time and the decomposition of risk's underlying drivers. Decompose predicted risk across various levels of factor aggregations as well as at the granular factor level. Discover the underlying security contributors to any granular factor's risk for any date range.
The application can visualize historic portfolio, supporting uploads for periods before 2010, depending on the risk model. Contact [email protected] to discuss uploading historic data and verifying a model's availability for periods before 2010.
Analyze: Predicted Risk Walkthrough
Total: Risk Decomposition (figure R.1)
Factors, Style, Sector, Country, Currency: Factor Trends (figure R.2)
Time Selection - You can select the time frame (MTD, 1M, 3M, 6M, YTD, 1Y, Custom) from the dropdown selector to display risk metrics during that time period. Figure R.2 displays the selected date (by clicking on the graph), and the date reset icon.
Graph Selection - Drill down and explore the factor risk decomposition. The Total graph (figure R.1) displays the Total Risk (left y-axis) vs the Factor, Specific Decomposition (right y-axis). Total Risk is specified in terms of predicted standard deviation of annualized returns, and the Factor/Specific decomposition is in terms of % of total risk. If you select one to the factor categories: Style, Sector, Country, Currency, the factor trends graph, figure R.2, is shown. Figure R.2 also has a date pre-selected, and you can see the date reset button next to the time selection.
Graph Toggles - Control what data you want to explore. Clicking on the different views will update the graph in real-time. You can deselect any factor from the legend and the graph will automatically resize to the new data set.
If there is a particular factor of interest that is not displayed in the graph, it is possible to select Preferred Factors through the factor profile. Search for the factor using the top-right search box, select the factor, then "star" the factor. Preferred Factors always display in the analyze and rebalance graphs.
History Graph - The graph displays all your selections on one big graph. Click anywhere to show returns for any date, while updating the risk contributions table to the right.
Risk Contributors - Display risk data for any selected date, organized by a factor’s absolute / active predicted annualized risk and whether the risk is outside its normal range (drift). Click on any row to view what securities in your portfolio contribute to that risk. Figure R.2 displays the securities that contribute to the Volatility factor.
This includes the ability to group security contributors by their descriptor. Described in detail below.
With the Contributor Groups Tool, any set of security contributors can be automatically rolled-up into their respective sector, industry group, industry (GICS levels 1-3), country, currency, or long/short book — highlighting how these groups are also impacted by factors.
Once groups are enabled, each groups aggregate contribution can be compared side-by-side. Clicking on a group will then display its underlying security contributors.
This roll-up tool is available across all views for performance, risk, and exposures.