How to master your backtest-statistics - part II.

Graphic Analysis

In Part one we analyze the Key Performance Metrics and now in part two we have a look at the Graphic Analysis.

The Cumulative Return graph shows the overallperformance of the strategy used. The time is on the X-axis and the performanceis displayed on the Y-axis.

Cumulative Returns (Log Scaled): Logarithmizing smooths the fluctuations, and the performance line becomes more linear. in the case of large inclines, this can lead to a better overview.

EOY Returns: shows the end-of-year performance of the strategy. The dashed red lineshows the average performance over the years.

Distribution of Monthly Returns shows the distribution of the performance of the individual months over time.

Daily Returns shows the distribution of the performance of the individual days overtime.

Rolling Volatility, Rolling Sharpe and Rolling Sortino shows the development of these metrics over time. The 6 month rhythm serves as the basis for the calculation. The reddashed line represents the average.

Worst 5 Drawdown Periods shows the cumulative performance and shows the five periods with the strongest drawdown in red.

Underwater plot shows the development of the drawdown over time.

Monthly Returns (%) gives an overview of the performance of the individual months. The higher the performance, the greener the month is marked. The lower the performance, the redder the month is marked.

Return Quantiles shows five box plots on a daily, weekly, monthly, quarterly and yearly basis. Box plots only show your data in a structured and clear manner. The interpretation is therefore limited to the statements that can generally be made about the minimum, the lower quartile, the median, the upper quartile, and the maximum.

Joshua Denefleh

CQO & Co-Founder

Strong background in financial markets, graduate from University Mannheim in B.Sc. Economics, KIT Karlsruhe University. Experience in quantitative methods, programming algo /w python