In this article, you'll learn about cumulative return and how it's calculated in Composer.
What is cumulative return?
The cumulative return is the percent change in the value of an investment over a given time period.
Let’s take a look at an example. In this backtest, we see the symphony’s cumulative return is 38.2%. That means that this symphony’s value increased by 38.2% over the length of the backtest period.
What is the formula?
What is the step-by-step calculation?
Let's go through the calculation of the cumulative return step-by-step for a symphony backtest. Here's how we do it:
Start with the value of the symphony on the final (i.e., the most recent) trading day of the backtest.
Subtract the value of the symphony on the first trading day of the backtest.
Divide by the value of the symphony on the first trading day of the backtest.
Multiply the resulting value by 100.