How to interpret the risk indicators

Duration:

It is used as a risk measure of the bonds, indicating the impact on its price as a result of the variation in the interest types. As a norm, the major the duration of a bond, the major the risk associated to this investment. It is obtained by calculating the average life of the bond in terms of the payments (coupon and principal,) taking into account each of the payments in relation to their due dates.

Also, it is understood as the necessary time in recovering the investment and its cost. In other words, a period of 2.0 years means that the portfolio debt securities are recovered in two years.

Modified Duration:

The modified duration shows the sensitivity of the securities' price related to the changes in the interest rates. If the modified duration of a portfolio is 0.40, it indicates that if there is a variation in the interest rates of a 1%, the debt's securities of the portfolio vary in a 0.04%.

Standard Deviation:

The standard deviation indicates the average of how a group of data moves away from its average. For example, if a fund has a return of 1.72%, and its standard deviation is 0.23%, it´s average return could vary between 1.49% and 1.95%.

Returns Adjusted by Risk (RaR):

It is a measure of quantitative analysis that indicates how the portfolio expected income could cover the expected loss. Therefore, the higher the indicator is, the better position the portfolio will have to face the eventual crises of the market.  

The result of the indicator will be the number of times that the profitability surpasses the expected loss.

Coefficient of Indebteness:

This indicator shows the indebtedness percentage of the securities portfolio of the Mutual Fund. This means that if the indicator is 2% of each ¢1 000,00 of the fund's assets, then ¢20,00 were obtained through financing or credits.

Stay Term:

The stay index indicates how much the balances stayed in the portfolio for each invested Colon.

The stay of the balances has an inverse relation with volatility. High volatilities may result in low stays or viceversa.

This indicator shows the average term (in years) that the investors have stayed in the Mutual fund. For its calculation, we use the history of the withdrawals that the mutual fund has experienced as well as the average administrative volume. For example, a PPI of 1.5 years means that the client's resources stay an average of 1 year and 6 months before asking for their withdrawal.

 

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