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Cummulative vs Annual return interpretation
Marcel Kresse
edited Feb 14, 2018
Seeking Help

Hello everybody,

I just analyzed my backtest with pyfolio.
First of all, I am really grateful for this open source tool. I learned a lot and gained a lot of insights into portfolio analytics.

Unfortunately, I just found something which I either dont understand.

I ran the backtest over a period of 15 years. The cummulative return runs up to 243.9% and the annual return runs up to 8.5%.

How is this possible?

243.9/15 = 16.26 a
8.5*15 = 127.5

Pyfolio output

Start date 2003-01-07
End date 2018-02-05
Total months 180

Backtest
Annual return 8.5%
Cumulative returns 243.9%

2 responses
Luca
Feb 13, 2018

This is the answer you are probably looking for Compound Annual Growth Rate - CAGR

1 year rate of return (the return the portfolio would have had every year if it had grown at a steady rate): 

 (2.439+1)^(1/15) - 1 = 0.08583 (or 8.583%)

Compound return after 15 years: 

(0.08583+1)^15 - 1 = 2.439 (or 243.9%)
Marcel Kresse
Feb 14, 2018

Thanks a lot

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