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Combine drawdown with other performance metrics
Max Hoefl
posted May 30, 2017
Seeking Help Portfolio Optimization Risk Management

Hi,

I have the problem that the max. drawdown metric doesn't really tell me much about my long-only strategy since the max. drawdown always occurs in 2007/08 and the other drawdowns (which might have been quite significant as well) are not reflected. I am not sure if it makes sense to look at the mean drawdown since there are so many small drawdowns that would be skewing the mean drawdown. So, maybe averaging the drawdowns above a threshold makes more sense.

The second problem is that I want to combine Sortino (or Sharpe) with my drawdown metric into one so I can more easily compare a bunch of strategies.

Suggestions welcome.
Thanks!
Max

1 response
Alisa Deychman
May 30, 2017

Max, you can run a tearsheet on your strategy to see more detailed performance and risk analyses. It'll have more information about your drawdown periods, their duration, and depth.

Introduction: https://www.quantopian.com/posts/new-feature-comprehensive-backtest-analysis-pyfolio
How to run a tearsheet: https://www.quantopian.com/research/Tutorials%20and%20Documentation

Cheers,
Alisa

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.