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The 5 Most Important Metrics to Evaluate Your Portfolio (and How to Measure Them)

Most investors only check performance “Did my portfolio go up or down this year?” But real portfolio evaluation is more complex. A truly strong investment strategy is not just about returns, but about how efficiently and consistently those returns are generated.


Here are the five key metrics, with the formulas professionals use to measure them.


1. Annual Percentage Return (APR)


Definition: Measures how much your portfolio grows in one year.

This shows the annual growth rate by comparing the final value Vf to the initial value Vi, adjusted over the number of years T.
This shows the annual growth rate by comparing the final value Vf to the initial value Vi, adjusted over the number of years T.

2. Volatility (Standard Deviation of Returns)


Definition: The fluctuation of returns around the average. High volatility means big swings in value; low volatility means smoother performance.

This measures how much each return Ri deviates from the average return Rmean across N periods, showing the variability of your portfolio.
This measures how much each return Ri deviates from the average return Rmean across N periods, showing the variability of your portfolio.

3. Sharpe Ratio


Definition: Return per unit of risk. If the Sharpe ratio is above 1, your portfolio is considered very efficient; above 2, outstanding.

This compares the portfolio return Rp minus the risk-free rate Rf to the volatility σ, showing how much excess return you earn per unit of risk.
This compares the portfolio return Rp minus the risk-free rate Rf to the volatility σ, showing how much excess return you earn per unit of risk.

4. Maximum Drawdown (MDD)


Definition: The largest loss from peak to trough before a recovery. This captures the worst-case scenario during market downturns.

 This captures the largest loss by comparing the portfolio value at time Vt to its previous peak Vmax, before recovery.
 This captures the largest loss by comparing the portfolio value at time Vt to its previous peak Vmax, before recovery.

5. Correlation

Definition: Measures how assets move relative to each other. Low or negative correlation between assets means stronger diversification benefits.

This evaluates how the returns of two assets Rx and Ry move together, scaled by their volatilities sigmax and sigmay, using their covariance.
This evaluates how the returns of two assets Rx and Ry move together, scaled by their volatilities sigmax and sigmay, using their covariance.

The Takeaway


A good portfolio is not just about returns, but about how those returns are achieved.


At CMA, we don’t just aim to maximize APR — we design portfolios that excel across all five dimensions: growth, volatility control, risk-adjusted performance, resilience in downturns, and smart diversification.


👉 Stop looking only at performance. Start evaluating your portfolio the professional way — with CMA.


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