Portfolio analytics terms, plainly defined.

CVaR (Conditional Value at Risk) is the average loss conditional on the VaR threshold being breached at a given confidence level.

VaR (Value at Risk) is the maximum loss not expected to be exceeded with a given confidence level over a given holding period.

Maximum Drawdown (MDD) is the largest peak-to-trough decline in a portfolio's cumulative value over a measurement window.

The Ulcer Index measures the depth and duration of drawdowns as the root-mean-square of percentage drawdowns over a measurement window.

Monte Carlo simulation generates a large number of random portfolio return paths to estimate the probability distribution of future outcomes given a return model.

The Pain Index is the average percentage decline from the running maximum over a measurement window — the mean depth of underwater periods.

Cornish-Fisher VaR is the Gaussian VaR adjusted for empirical skewness and kurtosis via the Cornish-Fisher expansion of the standard-normal quantile.

Bootstrap simulation re-samples historical returns with replacement to generate synthetic paths, preserving the empirical distribution without assuming a parametric model.

Skewness is the third standardised moment of a return distribution (asymmetry); kurtosis is the fourth (tail heaviness). Together they describe departures from normality.

Convexity is the curvature of a portfolio's return profile with respect to a market factor — positive convexity means gains accelerate and losses decelerate.

The Sharpe Ratio measures a portfolio's excess return over the risk-free rate per unit of total volatility, annualised.

The Sortino Ratio measures excess return per unit of downside deviation, treating only below-target volatility as risk.

The Calmar Ratio is the ratio of compound annual growth rate (CAGR) to the absolute value of maximum drawdown over the same period.

The Omega Ratio is the probability-weighted ratio of gains above a threshold to losses below it, capturing the full return distribution in one number.

The Rachev Ratio is the expected return above the upper VaR threshold divided by the expected loss below the lower VaR threshold — a tail-to-tail performance measure.

The Treynor Ratio is excess return over the risk-free rate divided by market beta — risk-adjusted return where the relevant risk is systematic, not total.

M² (Modigliani-Modigliani) rescales the Sharpe Ratio to the benchmark's volatility, expressing risk-adjusted return in percentage points directly comparable to the benchmark.

Risk Parity allocates capital so that each asset contributes equally to total portfolio volatility, regardless of its dollar weight.

Beta (β) is the slope of the regression of a portfolio's returns on a benchmark's returns — the sensitivity of the portfolio to the benchmark.

Alpha (α) is the excess return of a portfolio relative to the return predicted by its market beta, typically estimated via regression.

Tracking Error is the standard deviation of the difference between portfolio returns and benchmark returns, annualised.

The Information Ratio is annualised excess return over a benchmark divided by Tracking Error — the Sharpe-equivalent for active managers.

The Fama-French 3-factor model decomposes excess equity returns into market (Mkt), size (SMB) and value (HML) factor exposures, plus a residual α.

The Information Coefficient is the correlation between an active manager's forecast (signal) and the realised return — a direct measure of forecasting skill.