Each Model Portfolio page in Stock Doctor displays a strip of key metrics that give you a quick snapshot of the portfolio's characteristics. This article explains what each metric means and how to use them when comparing portfolios.
Key metrics explained
Update Frequency
How often the portfolio data is reviewed and potentially updated. Quant Model Portfolios update daily, while AI Model Portfolios rebalance monthly. This tells you how responsive the portfolio is to changes in market data and company fundamentals.
Rebalancing or No Rebalancing
Whether the portfolio actively rebalances its holdings and, if so, how. Equal Weight portfolios rebalance position sizes back to equal weighting at each rebalance event. No Rebalancing portfolios do not rebalance position sizes, holdings grow or decrease with price movement until replaced. AI Model Portfolios rebalance based on the model's monthly ranking output.
Volatility
The portfolio's risk classification, reflecting the expected level of volatility of the strategy. Risk levels used in Stock Doctor's Model Portfolio are:
- Low: Lower expected volatility relative to other growth strategies
- Moderate: Moderate expected volatility
- High: Higher expected volatility, typically associated with higher turnover.
- Very High: Highest expected volatility level.
This is a guide to the nature of the strategy, not a personalised risk assessment.
Avg. Tenure
The average number of calendar days a stock is held in the portfolio before being replaced. A lower average tenure indicates a higher-turnover strategy; a higher average tenure indicates a lower-turnover approach.
Sharpe Ratio
A measure of risk-adjusted return, calculated as the portfolio's excess return divided by its standard deviation. A higher Sharpe Ratio indicates better returns relative to the level of risk taken.
Maximum Drawdown
The largest peak-to-trough decline in the portfolio's value over its history. This gives a sense of the strategy's worst-case historical performance during a downturn.
Estimated Yield
The estimated dividend yield for the current financial year based on broker estimates or projection of historical dividends in the absence of broker coverage. This is an estimate and may change based on future company dividend payments.
How to use these metrics
These metrics are most useful when comparing portfolios against each other rather than in isolation:
- Investors comfortable with higher volatility in pursuit of stronger returns may be comfortable with portfolios with lower Avg. Tenure, higher Maximum Drawdown and a higher volatility rating.
- Investors prioritising consistency may prefer portfolios with higher Sharpe Ratios, lower Maximum Drawdown and lower volatility.
Disclaimer: These metrics are based on notional historical performance. Past performance is not a reliable indicator of future results, and these figures should not be the sole basis for investment decisions.