Investment Metrics

Understanding the numbers behind portfolio analysis — and why EPR simplifies them.

The challenge with traditional metrics.

Professional portfolio analysis involves dozens of metrics. Each tells part of the story, but interpreting them requires understanding what "good" looks like for each one — and how they interact.

Is a portfolio with 12% returns, 0.85 Sharpe ratio, and -18% max drawdown good? The answer depends on your investment approach, time horizon, and how these metrics compare to alternatives.

This is why Equily created EPR — to synthesize multiple metrics into a single, contextual score.

Annual Return

The percentage gain or loss your portfolio would have delivered over a one-year period, based on historical data.

A positive return — say +8% — means your portfolio would have grown by that amount over the measurement period. A negative return — say -5% — means it would have declined.

Returns alone don't tell the whole story. A portfolio with 15% returns but wild swings may not match an 8% return portfolio with steady growth — depending on your goals.

Volatility

How much your portfolio's value fluctuates over time. Higher volatility means larger and more frequent price swings.

~5% — Low volatilityBond-heavy portfolios

~15% — Moderate volatilityBalanced portfolios

25%+ — High volatilityConcentrated or growth-focused

Sharpe Ratio

Risk-adjusted return efficiency. It asks: "How much return did you get for the volatility you took on?"

A portfolio with 12% returns and 20% volatility has a different risk-adjusted profile than one with 8% returns and 10% volatility. The Sharpe ratio captures this relationship — (return - risk-free rate) / volatility — showing return per unit of volatility taken.

< 0.5Lower efficiency

0.5 – 1.0Moderate efficiency

> 1.0Higher efficiency

Maximum Drawdown

The largest peak-to-trough decline in your portfolio's value during a specific period. It shows the worst-case decline you would have experienced.

A -25% max drawdown means at some point during the analysis period, your portfolio fell 25% from its previous high before recovering. This is the largest such decline observed.

Max drawdown helps you understand the emotional and financial stress a portfolio might create during market downturns. A -40% drawdown is recoverable mathematically, but may be difficult to hold through psychologically.

Market Correlation

How closely your portfolio moves with the broader market. Ranges from -1 (moves opposite) to +1 (moves together).

~0.9 — High correlationMoves with market

~0.5 — Moderate correlationPartial independence

~0 — Low correlationIndependent movement

Why Equily Created EPR

Understanding each metric is valuable, but making decisions based on them requires expertise and context. That's where the Equily Portfolio Rating comes in.

Strategy context. EPR evaluates metrics in context — the same volatility level means different things for growth vs preservation portfolios.
Multi-dimensional analysis. EPR considers risk-adjusted returns, diversification, volatility, drawdown, goal alignment, and allocation flexibility together.
Single score clarity. Instead of interpreting 6+ separate metrics, EPR gives you one 0-100 score that synthesizes the analysis.

Equily still shows you the underlying metrics — EPR doesn't hide complexity, it helps you navigate it.

Key Takeaways

Returns aren't everything.

High returns with high volatility may not match your needs better than moderate returns with stability.

Context matters.

Whether a metric is "good" or "bad" depends on your investment strategy and personal circumstances.

Metrics work together.

No single metric tells the whole story — that's why EPR combines them into contextual analysis.

See how these metrics translate into your EPR score.

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