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Statistics and procedures used in the portal

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3 Months ROR

Compounded rate of return for the last three months.

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12 Months ROR

Compounded rate of return for the last twelve months.

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24 Months Statistics

The best/worst/average 24 month rolling return through the complete performance history. A rolling return is a compounded rate of return for series of specific time periods. For example, if testing between years 1990 and 2000, we start with the compounded return for the time window from January 1990 to December 1991. Then take February 1990 to January 1992, March 1990 to February 1992 etc. The last 24 month period tested will be from January 1999 to December 2000.

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36 Months ROR

Compounded rate of return for the last thirty-six months.

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Average ROR

Compounded average annual rate of return, which is calculated using the Total Return.

where

*R* is the compounded return and

*n* is the number of periods.

If you don't have an even number of years, instead of using a square root, raise the number to the power of (12 / number of months).

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Avg losing months

Average losing/negative month in percentage.

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Avg pos. Month

Average positive month in percentage.

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Beta

Beta is the slope of the regression line. Beta measures the risk of a particular investment relative
to the market as a whole (the “market” can be any index or investment you specify). It describes the
sensitivity of the investment to broad market movements. For example, in equities, the stock market
(the independent variable) is assigned a beta of 1.0. An investment which has a beta of 0.5 will
tend to participate in broad market moves, but only half as much as the market as a whole.

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Calmar Ratio

Return/risk ratio. Return is defined as the compound annualized rate of return over the last 3 years,
risk as the maximum drawdown over the last 3 years. If the performance history is shorter than 3 years, the available data is used.

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Correlation and Correlation Coefficient

The correlation coefficient is a statistical measure of the degree of linear relationship between
two variables. The correlation coefficient may take on any value between plus and minus one. The
sign of the correlation coefficient (+ , -) defines the direction of the relationship, either
positive or negative. A positive correlation coefficient means that as the value of one variable
increases, the value of the other variable increases as well; as one decreases the other
decreases too. Taking the absolute value of the correlation coefficient measures the strength
of the relationship. Thus a correlation coefficient of zero indicates the absence of a linear
relationship and correlation coefficients of one and minus one indicate a perfect linear relationship.

where

*σ*_{X} denotes standard deviation of the first variable,

*σ*_{Y}
standard deviation of the second variable and

where

*x* and

*y*
are means of first and second variable.

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Correl.DJ/CS MF

Correlation vs. Dow Jones Credit Suisse Managed Futures Index.

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Correl. NewEdge

Correlation vs. NewEdge CTA Index.

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Correl.S&P 500

Correlation vs. S&P 500.

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Down.Deviation

Similar to Standard Deviation, but Downside Deviation only takes losing/negative periods into account.
That's why it does not penalize the program for higher then average return, but only for higher then
average loss.

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Drawdown

A drawdown is any losing period during an investment. It is defined as the percent retrenchment from
an equity peak to an equity valley. A drawdown starts with the beginning of an equity retrenchment
and continuous until a new equity high is reached. (a drawdown encompasses both the period from the
equity peak to the equity valley (length) and the time from the equity valley to the new equity
high (recovery)). Maximum Drawdown is then the greatest cumulative percentage decline in equity.

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Kurtosis

Kurtosis characterizes the relative peakedness or flatness of a distribution compared with the
normal distribution. Positive kurtosis indicates relatively peaked distribution. Negative kurtosis
indicates relatively flat distribution.

where

*r*_{i} is the return of the

*i*-th month,

*r* is the average monthly return,

*n* denotes the number of months and

*σ* is the standard deviation of the monthly returns.

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Last Month

Rate of return for the most current month as reported by the program manager.

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Portfolio

To create a portfolio of different investment programs, you first need to establish a watchlist of programs you like/want to track. Then go to Edit portfolio page where you set allocations and leverage and press Add. After that click View Portfolio in the left top corner and you´ll see a detailed portfolio report. To delete the portfolio set an invested amount at all programs to zero.

Portfolio returns – to calculate monthly returns for a portfolio we first calculate VAMIs (using notional amounts) for each program contained in the portfolio. Then we sum up and create a portfolio VAMI (using cash levels) from which we then calculate monthly portfolio numbers. It means those numbers are not just simple averages derived from individual program numbers.

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Positive Months

Percentage of positive months.

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QEP (Qualified Eligible Person)

Programs marked as *QEP only* are only available for qualified eligible persons as defined under the (CFTC) Regulation 4.7.

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Rate of Return (ROR)

ROR is the ratio of money gained on an investment relative to the amount of money invested. It is calculated
using the compounding effect. With it the ROR for

*n* months

*R*_{n} is computed as:

where

*D*_{i} are motnhly performance data (one value per month).

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Risk/Return Chart

It shows the ratio of risk indicated by volatility, which is represented by annualized standard deviation, to annualized return (CAROR). Usually the low risk level is associated with low potential returns and vice versa. Determining what risk level is most appropriate will depend on your goals, income and personal situation, among other factors. To determine how well a fund is maximizing the return received for its volatility, you can compare the fund to another with a similar investment strategy and similar returns. The fund with the lower standard deviation would be more optimal because it is maximizing the return received for the amount of risk acquired.

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S&P 500

We use S&P 500 Total Return Index.

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Sharpe Ratio

The Sharpe Ratio is a measure of the risk-adjusted return of an investment.

where

*r* is the average monthly return,

*r*_{r f} is the risk-free return
(we use 0% per year as a risk-free return now) and

*σ* is the standard deviation of the monthly returns
over the same period.

This gives you

*s*, the monthly Sharpe you can annualize by multiplying it
by the square root of 12.

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Skewness

Skewness characterizes the degree of asymmetry of a distribution of returns around its mean. Positive
skewness indicates a distribution with an asymmetric tail extending toward more positive values.
Negative skewness indicates a distribution with an asymmetric tail extending toward more negative values.

where

*r*_{i} is the return of the

*i*-th month,

*r* is the average monthly return,

*n* denotes the number of months and

*σ* is the standard deviation of the monthly returns.

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Sortino Ratio

Return/risk ratio. The concept and the formula is the same as in the Sharpe ratio. The only difference is that it is calculated using
standard deviation of negative returns only as

*σ* (returns below a minimum acceptable threshold).

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Standard deviation

Standard deviation measures the degree of variation/uncertainty of returns around the mean/average return.
The higher the volatility of the investment returns, the higher the standard deviation. That is why
the standard deviation is often used as a measure of risk.

where

*s*^{2} also denoted as

*σ*^{2} is variance,

*x*_{i}s
are values and

*x* is mean of values.

The square root of the variance

*σ* is the standard deviation.

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Sterling Ratio

Return/risk ratio. Return is defined as the compound annualized rate of return over the last 3 years.
Risk is defined as the average yearly maximum drawdown over the last 3 years less an arbitrary 10%. If the performance history is shorter than 3 years, the available data is used.

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Stress Testing

Stress testing is a method of determining how the program will behave during a period of financial crisis.
We use the worst monthly S&P500 returns as a stress time. You can also use hypothetical scenarios
(for example Monte Carlo simulation) or known historical events (for example Russian debt default
in 1998 or 9/11 terrorist attacks).

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Total Return

Compounded rate of return since inception.

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Value Added Monthly Index (VAMI)

This index reflects the growth of a hypothetical $1,000 in a given investment over time. The index
is equal to $1,000 at inception. Subsequent month-end values are calculated by multiplying
the previous month’s VAMI index by 1 plus the current month rate of return.

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Value at Risk

This is the maximum amount of capital that the position can expect to lose within a specified
holding period (we use 1 month period) and with a specified confidence level (we use 95%).
Example: if VaR is -10%, you can expect that 95% of the next month returns will be better than -10%.

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Volatility chart (12 months rolling)

The Volatility chart is based on the standard deviation calculation (see the Standard deviation definition) and shows how the volatility of returns changes through the programs/portfolio trading history. 12 months rolling volatility means that we calculate standard deviation using the 12 month rolling periods of returns and we get a specific standard deviation value for each period. For rolling returns definition see

*24 Months Statistics*.

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Watchlist

To add a program to the watchlist, click on the program from the list on the left-hand side of the screen and press the button "add to (remove from) watchlist". After you add the program, you will see how many programs you already have in your watchlist.

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Year To Date

Current year's return, calculated by summing the returns of current year months using the compounding effect.