Comparing portfolio to market?

Discussion in 'Trading' started by Cyber0066, Aug 8, 2006.

  1. Are there any websites that'll give you a graphical comparison between your portfolio and like, the S&P or NYSE?
  2. Cool idea. I could make one but Im lazy.
  3. I'm surprised I haven't been able to find one yet. I would've thought that portfolio trackers like yahoo finance etc etc would have it.

    How would you make one? I might do it if its not too difficult.
  4. Here's a simple way you can find out how your account correlates to the S&P 500 (or another market) in excel. You will need the equity balance from your monthly statements over the period you are interested in, and monthly close price for the market you want to compare yourself against (the link below is the monthly closes for the S&P 500 from yahoo finance).^GSPC&a=00&b=3&c=1950&d=07&e=8&f=2006&g=m&ignore=.csv

    1) Open up the spreadsheet with the S&P monthly returns and delete columns B through F. You only need the Date and the adjusted close columns.

    2) Delete the most recent row, which will be row 2 because it is an incomplete month.

    3) I see "07/03/06" in A2, and 1276.66 in B2. Put the account balance at the end of your July statement in C2.

    4) Repeat step 3 for each month that you have a statement for.

    5) Delete all of the extra rows that you don't have a monthly statement for from the bottom of the spreadsheet.

    6) Use the following function in a blank cell to compute the correlation between your account and the S&P 500:


    Replace X with the last row that you have entered data for. For example, if I entered the final balance from each of my statements from December '05 to July '06, then I've used cells C2 through C9, so the correlation formula is:


    The cell computes 0.76 for me, which means my account balance has been 76% correlated to the movements in the S&P 500 this year. A rule of thumb is that as your investment holding time increases, the more correlated to the indices your account balance will be.

    Over the last 30 years, the nasdaq and S&P 500 are 96% correlated on a monthly basis. This means that you won't see much of a difference if you test the correlation of your account balance against the naz instead.

    Note that deposits and withdrawals will reduce the relevance of the correlation calculation. The best case from an analysis standpoint is when you have a long period with no deposits or withdrawals to look at.