Performance attribution analysis is a process designed to determine how a portfolio is performing relative to a specific benchmark, and to highlight areas of the portfolio that are over- or under-performing. The Stock/ETF Benchmarker displays portfolio performance attribution values which update in real time throughout the day 1.
At the current time (T), the weight of security "s" in portfolio "P" is given by:
where mvsT is the market value of s at the current time, and mvPT is the market value of the portfolio at the current time.
The total portfolio return for the day in shown in the comparison tile in the upper-left corner. At the current time (T), the return for the day is given by:
where PNLPT is the overall PNL on the portfolio at the current time, and NAVP0 is the prior day's closing NAV for the portfolio.
The contribution of a security to return of security "s" in portfolio "P" over the time ranging from (0; T) where "T" is the current time is given by:
Where PNLsT is the daily PNL on s at time T, and NAVP0 is the prior day's closing NAV for the account.
The cumulative contribution of a sector (or other grouping) "G" to the return of a portfolio "P" over a period (0; T) is defined as:
If the side of the position changes at any point during the day, such as when a client reverses a position (close a position then establish a position on the opposite side for the same amount of shares), the PNL is tracked separately for both the long and short portions of the overall position.
For each trade per security that has a realized P&L, we divide the PNL into a long or short bucket based on whether the trade was a buy or a sell.
We then calculate long and short contributions for the security, and compare to the benchmark index. For the example below, assume that:
|Action||Quantity||Symbol||Realized PNL||Net Position|
In the above example, the total realized PNL on ABC is 30 USD. Of this, 20 USD was realized by closing long positions, and 10 was realized by closing short positions. The contribution to return of long ABC is 2%, the contribution to return of short ABC is 1%, and the net contribution to return of ABC is 3%.
When displaying the weight for long ABC and short ABC, we look at the current weight. Therefore if the client is currently short ABC but was long at some point during the day, there will be a negative value in the weight column in the short ABC row (market value of short position is negative), and the long ABC row will show "0" for the weight (as the client is not currently long ABC).
If we also assume the benchmark was long ABC during this period, and the contribution of long ABC to the benchmark was 1%, then the active contribution of long ABC is 1% (2% - 1%), and the active contribution of short ABC is 1% (1% - 0%) as the contribution of short ABC to the benchmark return was 0.