Portfolio Analysis Definition

Portfolio analysis is the process of assessing the performance and risk of a portfolio of investments. The goal of portfolio analysis is to identify which investments are performing well and which ones are not, in order to make decisions about how to allocate funds.

There are many different ways to conduct portfolio analysis, but one common approach is to use a tool called a Sharpe ratio. The Sharpe ratio measures the return of an investment relative to its risk. A higher Sharpe ratio indicates that an investment has generated more return per unit of risk.

Another popular approach to portfolio analysis is called maximum drawdown analysis. This approach measures the largest peak-to-trough decline in the value of an investment over a given period of time. Maximum drawdown can give you a sense of how much risk you are taking on with an investment, and whether or not that risk is worth it.

No matter which approach you use, conducting regular portfolio analysis can help you make informed decisions about where to allocate your funds, and can help you keep your portfolio on track towards your goals.