In this article, we explain what you get when you run a Diversiview analysis.
Disclaimer: the securities mentioned in this article are for exemplification only. We do not endorse or criticise any of them. Your analyses will contain your preferred securities.
Firstly, to recap, you can run a Diversiview analysis in 3 different ways: directly from the website (https://diversiview.online/order), from your dashboard if you have a subscription (click on the 'New analysis' button, see the screenshot below) or by importing a portfolio from your portfolio management software.
Currently we integrate with Sharesight, the premier Portfolio Tracking and Reporting Software. You can very easily import any of your available Sharesight portfolios in just a few clicks - simply connect to Sharesight (the orange button in the screenshot below) and select the portfolio you want to analyse. Diversiview will do the rest for you.
Note: if you run a new portfolio analysis from scratch (not by importing) you will just enter the securities codes and their weights, if applicable. If no weights are provided, all are given equal weights in the analysis. If you import your portfolio from a portfolio management platform, the weights for the securities will be calculated during the import.
After you run the analysis, you will get an email with a link to the result of the analysis. That will also be shown in your dashboard if you are on a subscription.
Let's look at the Diversiview analysis page.
At the top you'll see a menu for navigating to the main 4 sections. You can jump directly by selecting the applicable link.
In the Performance & Benchmark section, you will see two main areas:
First, Diversiview calculates 5 main portfolio indicators that are critical to assessing portfolio health and benchmarking its performance.
- Portfolio expected return
- Portfolio volatility (risk of loss)
- Sharpe ratio
- Portfolio Beta
- Portfolio Alpha
Note: in calculating Portfolio Beta and Portfolio Alpha, Diversiview uses the ALL ORDS index as a representation of the 'entire market'.
Diversiview also provides some interpretation of the results immediately after the portfolio indicators, but if you want to learn more about each of them you can click on the small blue question marks underneath.
Then, Diversiview displays your Portfolio Universe ® and the position of your portfolio within that universe and in relation to the Efficient Frontier.
Portfolio Universe is the multitude of portfolio positions that can be obtained for the set of securities you analyse, if they are combined in different ways (that is, with different weights). Each portfolio combination will have a different risk and return, and the green dot shows which one is your analysed combination.
The Efficient Frontier is made up from those portfolio positions that are 'efficient', that is, that have the maximum expected return for a given level of portfolio risk. The efficient portfolios from the Efficient Frontier are shown as orange dots.
Note: this diagram is not interactive, but you will have the option to try scenarios that target the Efficient Frontier points; read further.
In the Health & Allocation section, you will see the portfolio composition (that is, the weights that define that particular portfolio position).
You will also see the allocation by securities groups and by market capitalisation. We call these graphs 'eagle eye diversification view' because the view is coarse. Diversiview also provides a deep, granular diversification view, at security level, further below.
A short interpretation of the information from the graphs is also provided, as it relates to portfolio risk. You can click on the blue question marks to learn more about why that information is important for gauging portfolio risk.
In the Diversification Deep Dive section, there are four main areas.
First, you get a diversification rating and a note about the number of strong positive correlations in your deep, granular diversification diagram.
Note: strong positive correlation between two investments means that they move in the same way, that is, they react in the same way to risks factors (business, economic, social, politic etc). So their prices will grow or decrease more or less at the same time.
If you want to have a diversified portfolio but your diversification rating is low, that is, if you have many strong positive and many positive correlations in your portfolio, it means that your selection of securities has not achieved the diversification goal.
The next area in the Diversification Deep Dive section is the interactive deep, granular diversification diagram. That shows the investments as nodes, and the correlations between pairs of securities are shown as connecting lines with different colours depending on the strength of the correlation.
You can use the filters on the left to remove the noise and focus on what is most critical to your portfolio: the positive and strong positive correlations, as they prevent you from reaching your diversification goal.
Diversiview also provides information about how to interpret the diagram,
as well as a description of the colours used on the diagram.
(Hint: as you can see from the legends, Diversiview allows you to include crypto in your analysis. Many investors try to figure out how much risk they can afford to take with crypto. If you are one of them, try Diversiview with crypto).
In the What's Next section, you will find 4 very powerful tools to explore your current portfolio and try different risk & return scenarios, i.e. different portfolio positions with better expected return and/or lower risk (volatility).
Let's look at each of these tools in turn:
Analyse with preferred returns - gives you the option to not rely on the expected returns that Diversiview calculates for you based on historical data. You can enter your own prediction of returns, for each investment, and re-run the analysis.
The portfolio composition (weights of the investments) and the volatility (risk) for each investment will stay the same. You only provide your preferred returns and click 'Calculate'.
The new analysis will be sent to your email, and displayed in your dashboard if you are on a subscription.
Balance to Minimum Risk - allows you to find the particular portfolio position that gives the minimum possible portfolio risk (volatility). That minimum risk position is also called Minimum Variance Portfolio.
Note: When you calculate the Minimum Risk Portfolio you have the option to specify your minimum and maximum weighting constraint. For example, you may not want to have less than x% or more than y% in any given investment. These constraints will be considered in calculation, and only the solution that fits the constraints will be produced.
Balance to Max Return & Min Risk - gives you the opportunity to calculate the portfolio position that minimises the risk and maximises the expected return, at the same time. This is called Optimal Portfolio.
If provided, the calculation will consider your minimum and maximum weighting constraints in producing the result.
Last but not least, maybe the most powerful tool within the suite of Diversiview features, Find Efficient Frontier positions will allow you to travel along the Efficient Frontier and find those positions that have maximum expected return for the level of risk selected. These are the orange points on the Portfolio Universe diagram shown earlier on the page.
Imagine traveling along the risk (horizontal axis) in the Portfolio Universe diagram. As you increase or decrease the level of risk, the calculated maximum expected return will be shown underneath.
Once you are happy with those values, that is, with the expected return for the level of risk selected, you click on 'Run analysis'.
Note that you can also specify the min and max weighting constraints again at this stage, unless you already specified them when you run the Minimum Risk Portfolio or the Optimal Portfolio.
The last feature in the What's next? section is a VIX diagram that is updated in close to real time.
VIX® Index is an indicator of market volatility showing the 30-day expected volatility of the S&P 500 Index. A high VIX index indicates more expected uncertainty and higher volatility in the marketplace. Also known as the ‘fear gauge’, a high VIX® Index shows upcoming market fear and bearish market participants.
Many investors look at VIX when they make decisions about timing their buy or sell transactions.
We hope that this article was helpful in understanding what is included on a Diversiview analysis.
We showed that, along with unique portfolio indicators and deep diversification view, not available on any other investors platform, Diversiview also gives you access to at least 4 other very powerful planning tools to try different scenario, mitigate the risk and find that portfolio position that works best for you.