Long/Short subportfolio: Price+Distribution graph

[investor425]

Hi,

Suppose I create a basic long/short subportfolio as follows:

1) default cash account
2) short SPY
3) long VWO

I have allocated the same to the long and short sides so that the portfolio starts off as market neutral.

The subportfolio value will obviously vary over time as the investment prices change on each of the long and short sides.

For this subportfolio, I can do "graph as" -> "portfolio/investment(s) overlay" -> "value" and I see the value of the subportfolio change over time. That's great.

However, when I try and "graph as" -> "portfolio/investment(s) overlay" -> "Price + Distributions", all I get is a flat line at the 100 mark of the vertical axis.

I need to be able to do a "Price + Distributions" graph of that long/short subportfolio, so I can overlay it's graph with my other long-only subportfolios.

I can't use the "value" overlay graph to compare this subportfolio with my other subportfolios because all the subportfolios start off at different values.

So the question is: how can I get a "Price + Distributions" overlay graph of the above described long/short portfolio?

Thanks very much!

[Mark]

Hi investor425,

By default the graph "Graphs / Portfolio/Investment(s) Overlay / Price + Distributions" uses daily ROI figures to calculate, and this requires positive values for an ROI calculation. If you use "Help / Logs / Graph Calculation..." it probably is telling you about some non-positive values, preventing an ROI calculation. There is an alternative calculation method you can switch to by turning on:

Graphs / Options / Display... / Allow Fast Portfolio "Price" Calculation for Price + Dist. Overlay Graph

Press "Help" in that dialog box to read more about this option.

[investor425]

Hi Mark,

Thanks for replying.

If I select: Allow Fast Portfolio "Price" Calculation for Price + Dist. Overlay Graph

... that indeed shows me a proper plot of the market neutral subportfolio, but then every other long only subportfolio I overlay on that graph shows up as a flat line.

If I don't select: Allow Fast Portfolio "Price" Calculation for Price + Dist. Overlay Graph

... then all the long only subportfolios overlaid on that graph show up with a proper plot, but the market neutral subportfolio shows up as a flat line.

What I want to see is a graph where I can compare the market neutral subportfolio's performance to a long only subportfolio's performance.

How can I do that?

Thanks very much.

[Mark]

Hi investor425,

Is the value of your "market neutral" portfolio going negative? I wasn't sure how much you had in the default cash account, and whether that was preventing the portfolio value from dipping negative? I'm just trying to reproduce this here. Or, you can email me the 3 investment files, so I can recreate the issue. I've tried to re-create this issue, but couldn't. Maybe you can put the 2 sub-portfolios (the market neutral and long) into a new *.mm4 file, make a backup using "File / Backup..." and email that to me? I'll send you an email, so you can reply to that.

[investor425]

Hi Mark,

Thanks very much. I've replied to your email with the FM backup attached and some screenshots.

I appreciate your great customer service!

[investor425]

Hi Mark,

I replied to your email but wanted to also post the solution here so others in a similar situation might benefit.

Your were correct, the issue was that the market neutral portfolio was going into negative due to drawdowns.

I retroactively added more money to the cash account for the market neutral subportfolio to absorb any drawdowns without pulling the subportfolio into negative, and now both plots are working fine on the overlaid graph, both the market neutral and the long only.

You may want to update the Fund Manager documentation so people know that market neutral portfolios (I imagine this may be true for any leveraged subportfolio (?)) needs to be defined with enough cash in the cash account to absorb any drawdown without going negative.

Thanks so much for all your help!

[Mark]

Hi investor425,

Okay, thanks for sharing your learnings, and glad you got it working.