Venn provides users with multiple ways to analyze the impact of historical, hypothetical and forward-looking drawdowns on individual investments and portfolios. Let’s walk through each use case.
Historical Drawdown Analysis Table and Chart: "In which periods has my investment/portfolio experienced a drawdown in the past?"
These straightforward sets of analyses show all historical drawdown periods an investment or pro forma portfolio experienced over the timeframe of your choice. Key metrics such as the current portfolio's drawdown percentage, drawdown length, recovery period and benchmark performance provide a helpful snapshot for each period. Interested in viewing only extreme historical drawdowns? It’s easy to filter for a specific “Drawdown Threshold.” With Venn Pro, you can also see how the “Optimized” version of your pro forma portfolio would fare during each drawdown period.
You can also view the newly added Historical Drawdown Chart to visualize how your investment/portfolio has drawn down through history. The line will be at zero if the subject never entered a drawdown during the analysis period selected (i.e., values range between 0% and -100%).
Hypothetical Drawdown Analysis: “Which historical periods would have resulted in a drawdown given my investment/portfolio’s recent factor exposures?
Hypothetical Drawdown Analysis was designed to help allocators understand which historical periods, if repeated today, could create a drawdown in a portfolio or investment, given the latest factor exposures as determined on Venn.
Be sure to click into a given period to find out more information such as: the shape of the hypothetical drawdown period, a snapshot of that period’s market environment, and how the factors exposures, strategies and investments may have contributed to that drawdown.
Find out more by checking out our FAQ: Drawdown Analysis.
Scenario Analysis: How would my investment/portfolio be impacted by a future market shock?”
Scenario Analysis is a forward-looking tool that shows you what a shock to a particular index might mean for your investments and portfolio. Select from over a dozen index options and input your projected scenario return. Venn calculates the sensitivity of the scenario index’s returns as well as the portfolio’s or investment’s returns to the factors in the Two Sigma Factor Lens. By translating each return into the shared language of factor exposures, Venn can then estimate how a shock to one (here, the scenario index) would likely affect the other (the portfolio or investment).
Check out our FAQ: Scenario Analysis for more information.
This article is not an endorsement by Two Sigma Investor Solutions, LP or any of its affiliates (collectively, “Two Sigma”) of the topics discussed. The views expressed above reflect those of the authors and are not necessarily the views of Two Sigma. This article (i) is only for informational and educational purposes, (ii) is not intended to provide, and should not be relied upon, for investment, accounting, legal or tax advice, and (iii) is not a recommendation as to any portfolio, allocation, strategy or investment. This article is not an offer to sell or the solicitation of an offer to buy any securities or other instruments. This article is current as of the date of issuance (or any earlier date as referenced herein) and is subject to change without notice. The analytics or other services available on Venn change frequently and the content of this article should be expected to become outdated and less accurate over time. Two Sigma has no obligation to update the article nor does Two Sigma make any express or implied warranties or representations as to its completeness or accuracy. This material uses some trademarks owned by entities other than Two Sigma purely for identification and comment as fair nominative use. That use does not imply any association with or endorsement of the other company by Two Sigma, or vice versa. Click here for other important disclaimers and disclosures.