Rev. Date July 11, 2024

Venn provides users with multiple ways to analyze the impact of historical, hypothetical and forward-looking drawdowns and rallies on individual investments and portfolios. In particular, Venn’s outputs include Historical Drawdown Analysis, Notable Historical Periods, Historical Drawdowns and Rallies, Hypothetical Drawdown Analysis and Sensitivity Analysis. These analytics can also be found within Venn’s “Stress Testing” template. Let’s walk through each use case and how one can use them to evaluate potential risk.

These straightforward sets of analyses show all historical drawdown periods an investment or pro forma portfolio experienced over the timeframe of your choosing. Key metrics such as the current portfolio’s drawdown percentage, drawdown length, recovery period and benchmark performance provide a helpful snapshot for each period. Interested in viewing only extreme historical drawdowns? It’s easy to filter for a specific “Drawdown Threshold.”

You can also view the Historical Drawdown Chart to visualize how your investment/portfolio has drawn down through history. The line will be at zero if the investment or portfolio never entered a drawdown during the analysis period selected (i.e., values range between 0% and -100%).

Select from a preset list of well known historical periods to identify if an investment or portfolio had either underperformed or outperformed given observed returns over that time period (e.g., The Global Financial Crisis, U.S. Taper Tantrum, Oil Price Shock of 2015, EM Melt-Up, Brexit, COVID-19 Crisis, and more).

Enter in a threshold to see all the periods that an investment or portfolio underperformed or outperformed a given threshold, throughout its history. Use this to better understand when and how often tail events occurred historically.

Find out more by checking out our FAQ: Historical Drawdown and Rally Scanner.

Hypothetical Drawdown Analysis was designed to help investors understand which historical periods, if repeated today, could create a drawdown in a portfolio or investment, given the latest factor exposures as determined on Venn.

Be sure to click into a given period to find out more information such as: the shape of the hypothetical drawdown period, a snapshot of that period’s market environment, and how the factor exposures, strategies and investments may have contributed to that drawdown.

Find out more by checking out our Feature Overview: Hypothetical Drawdown Analysis.

Sensitivity Analysis is a forward-looking tool that shows you what a shock to a particular input might mean for your investments and portfolio. Select from over 60 options to shock . Venn calculates the sensitivity of the shock input’s returns as well as the portfolio’s or investment’s returns to the factors in the Two Sigma Factor Lens. By translating each return into the shared language of factor exposures, Venn can then estimate how a shock to one (here, the shock input) would likely affect the other (the portfolio or investment). When entering more "extreme" shocks (i.e., greater than 2 standard deviation events), Venn uses a proprietary machine learning-based approach to regime modeling by sampling from the distributions of certain market conditions. You can learn more about our approach here.

Check out our Feature Overview: Sensitivity Analysis for more information.

This document highlights certain aspects of this feature. As an overview, it does not discuss all material facts or assumptions. Please seeImportant Disclosure and Disclaimer Information.