Risk & Reward Chart

[trixs]

Hey Everyone,

Ive been working on a risk/reward online graphing program and wondering what you guys think. Basically this tool lets you see how adding various low correlated assets together reduces portfolio risk. It produces the same type of charts that you see in the financial books such as Dr. Bernsteins. I have never seen a tool to reproduce these so I decided to make one.

Anyway heres a link: Risk Reward Chart

Please let me know what you think! I am not very good at describing this tool but intend to write up a lengthy explanation

- trixs

 

[samclem]

Comments:

1) As you note, the explanation of this tool needs to be more thorough. I can't really see what the results mean. Without that, the exercise lacks significance.

2) On the graph, I can't tell which line is which. I happened to choose an allocatiomn that has both lines starting at the identical point, so neiter one is "to the left".

3) It would be handy to have a key to automatically copy all entries from "Allocation One" into "Allocation 2", so users could have a starting point to vary from.

4) The data sets used are not indicated. Users will want to know if your data comes from 2000-2007 or 1911-2007

 

[trixs]

Thanks for the reply. Other eyes see things mine completely miss!

1 - Yea, I just have not had the time to write a good article.

2 - There is only 1 line. One side of the line would be 100% portfolio A while the other end would be 100% portfolio B. The middle point would be exactly 50% of each portfolio. The result is you can see how adding say, 30% bonds to a 100% TSM portfolio would reduce risk. In interesting exercise is to see how adding some stocks to a 100% bond portfolio actually decreases risk and increases return.

4 - Will do... In fact I should make them user selectable.

 

[trixs]

Hey Everyone,

I have added an explanation page to the tool to hopefully help those that have never seen such a chart.

- trixs

 

[clifp]

The start of a very good tool. I agree with Sam's suggestions. So labels on the graph showing the delta between Allocation 1 and 2 would be helpful

 

[Midpack]

Backrest I meant

How is the backrest coming along?