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Portfolio Backtesting Glossary
The terms used in a backtest should make the decision easier to understand, not create a barrier to using the tool.
Questions about glossary.
What is a portfolio backtest?
A portfolio backtest applies explicit assets, weights, dates, contributions, and rebalancing rules to recorded historical prices. It answers ‘how would this defined rule set have behaved in that window?’ It does not prove that the portfolio will behave the same way in the future, and it cannot recover information that was unavailable at the time. PortfolioBacktest presents the result as a calculation record with assumptions, data boundaries, and risk measures so a reader can distinguish historical evidence from a recommendation or forecast.
What is a controlled comparison?
A controlled comparison holds the reference portfolio, dates, initial capital, data treatment, and calculation rules constant while changing one declared variable. The variable might be an allocation, asset, contribution schedule, start date, or rebalance frequency. This design makes the difference easier to attribute and reduces the temptation to compare two portfolios that are different in every important way. It is not a laboratory proof of causality, but it is a much clearer decision experiment than an uncontrolled leaderboard.
What is relative performance versus SPY?
Relative performance expresses how the portfolio moved compared with a 100% SPY reference using common dates. In the chart, the gray SPY-matched line is set to 0%; the portfolio line above it indicates outperformance and the line below it indicates underperformance. The ending relative difference is useful, but the path matters more than the final point: it shows whether the lead was persistent, arrived late, or disappeared during a drawdown. Relative performance is historical excess, not guaranteed alpha.
What do rebalancing and contribution rules mean?
Rebalancing is the schedule used to move holdings back toward target weights, such as annually or quarterly. Contributions specify when new capital enters and whether the same amount and timing apply to every variant. These rules change the path even when the asset list is identical. Fractional shares, cash handling, dividends, and the price field also matter. A fair comparison states them once and applies them consistently; otherwise a result may credit an allocation for an effect actually created by implementation timing.
What does ‘result consistency’ mean in this product?
Result consistency is the degree to which a finding remains directionally similar across different start dates, nearby allocations, and relevant market conditions. It is a way to qualify a conclusion, not a promise that the future will repeat the past. A consistent drawdown reduction may be more decision-useful than a single spectacular return lead. When a finding is conditional, the report should say what condition matters—such as a technology bull market, a rate shock, or a particular start year—so the user knows which assumption to challenge next.