The drawdown chart helps you better assess the risk of an investment. You can see at a glance how investments have reacted to market fluctuations in the past and draw conclusions for future investments.
What is a drawdown chart?
A drawdown chart shows, for each point in time, how far the value of an investment is below its previous high. The largest of these declines in the selected period is the maximum drawdown. This is particularly useful for assessing the risk and volatility of investments. When the value of an investment falls, you can see exactly how sharp the decline is and how long it lasts before the investment has stabilized again.
With a Plus or Investor subscription, you’ll find the drawdown chart on your portfolio’s dashboard and on the page of individual holdings, in each case in the “Drawdown” tab. The drawdown chart is only available in the web app, not in the Parqet mobile app. The value in the chart is the decline from the last high that applied at that point in time, in percent. A new high is at 0%, declines are negative. Above the chart, you see:
Current drawdown: decline from the last high to today
Maximum drawdown: largest decline in the selected period
Duration: length of the longest phase below the high, in days
Period: start and end of this phase. If it’s still ongoing, it ends today.
On the page of a holding, you can show your “Activities” in the chart under “Overlay”. For securities, you’ll also find “Security events” there.
Example of how the drawdown chart is calculated
Let’s say the value of one of your investments reaches a high of €1,000 on January 1. By February 1, the value of this investment falls to €800. So on February 1, the chart shows −20%, because the investment has fallen by €200, which is 20% of the high of €1,000. The drawdown therefore measures the loss from the last high to the respective day.
What affects the drawdown in Parqet?
Period: The first high is the value at the start of the selected period. A higher level before that doesn’t count.
Deposits and buys: They don’t create a new high or a jump in the chart. Parqet excludes fresh capital.
Reference account: If your portfolio has a reference account, the cash counts toward the portfolio value. Cash doesn’t fluctuate, so the drawdown is usually smaller with cash.
Weekly values: For the last 60 days, Parqet uses daily values, before that one value per week (Fridays). A low in the middle of the week may therefore be missing from the maximum drawdown.