Portfolio analysis is often referred to as portfolio analytics at StatPro. In this glossary the two are interchangeable.
Portfolio analysis is the study of the performance of a portfolio in order to maximize the expected or future return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets. In simpler terms portfolio analysis enables firms to bridge the gap between strategy formulation and strategy implementation. In other words, it helps you make the hard choices of where to put your money.
Portfolio analysis is a powerful tool that will make managing your portfolio easier. By analyzing all of the investments you hold, and delving deep into where positive performance is coming from you can build a detailed picture of your entire portfolio. You may want to analyze:
- Historical performance – what has performance looked like in the past, over a given period of time against a benchmark
- Value at Risk (VaR)– what has been the risk return from the portfolio
- Portfolio characteristics – what is the portfolio made up of and how can these be adjusted or removed to improve performance?
- What if scenarios – looking at past events in the market, what would happen if these were to occur again in the future and how would it affect the performance of the portfolio and therefore the gains.
In order to analyze a portfolio, portfolio analysis tools or portfolio analysis software is used.