Drawdown

The Drawdown measures how far an investment is below its best moment. On each date, it shows the percentage drop of the accumulated return relative to the highest value it has ever reached (the peak). While the return answers "how much did the investment yield?", the drawdown answers "how much did it fall from its highest point?".

That is why drawdown is one of the most widely used risk indicators: two portfolios with the same return can follow very different paths, and the drawdown reveals the depth of the losses the investor would have faced along the way.

How it is calculated

The drawdown is calculated over the daily series of the accumulated Time-Weighted Return (TWR). On each day, Gorila compares the accumulated return with the highest value it has reached up to that day:

$$\text{Drawdown} = \frac{1 + \text{Accumulated TWR on the day}}{1 + \text{Highest accumulated TWR up to the day}} - 1$$

• When the return is at its peak, the drawdown is zero.
• Below the peak, the drawdown is negative and shows the percentage drop relative to it.
• The result is a decimal number: -0.25 means a 25% drop from the peak.

The drawdown is never positive. It goes back to zero whenever the accumulated return exceeds the previous peak, and the new value becomes the reference peak.

Example

Date	Accumulated TWR	Peak up to the date	Drawdown
Jan 2	0%	0%	0%
Mar 1	+20%	+20%	0%
Jun 3	−10%	+20%	0.90 ÷ 1.20 − 1 = −25%
Sep 1	+8%	+20%	1.08 ÷ 1.20 − 1 = −10%
Dec 1	+26%	+26%	0%

On Jun 3, the portfolio is 10% below its initial value, but 25% below its peak (reached on Mar 1). On Dec 1, the return exceeds the previous peak, and the drawdown goes back to zero.

Effect of the queried period (startDate and endDate)

The drawdown on a date is always calculated from the portfolio's entire history, not only from the queried period:

• startDate does not change the values, it only filters what is returned. The accumulated return and the peak are calculated from the portfolio's inception, even if startDate is later. Therefore, the first value of the series may be negative: if the portfolio was already below a peak reached before startDate, that peak remains the reference. In the example above, a query with startDate on Jun 3 would start at −25%, not at zero.
• endDate only defines where the series ends. Since each value depends only on what happened up to that date, changing endDate does not change the values before it.
• When no dates are informed, the series covers the portfolio's entire available history.

In short, the drawdown on a given date is always the same, whatever the queried period. This is different from the TWR of the return endpoint, which is accumulated from startDate. Therefore, to check the drawdown against the return, consider the TWR accumulated since the portfolio's inception.

Which return is used

• The drawdown of portfolios and economic groups uses the TWR net of costs (brokerage and other transaction fees), without the gross-up adjustment of tax-exempt income. It therefore matches the TWR queried with type=GROSS, not the return endpoint's default (GROSS_UP).
• Like the return, the drawdown follows the automatic exposure rule: the return is calculated from the wealth perspective, unless the grouping contains only futures and forwards.
• The filters by security, asset class, security type, classification and broker restrict the positions considered. In that case, the drawdown is calculated over the return of those positions only.
• The series is always daily.

Security drawdown

You can also query the drawdown of an isolated security, outside the context of a portfolio (see Security Metrics). The logic is the same, with two differences:

• The calculation considers the security's entire price history, from the first available price. As with portfolios, startDate only filters the response, and the reference peak may be earlier than it. Note that this is different from the security's TWR, which simulates a purchase on the period's start date.
• The type parameter lets you choose the return basis: GROSS (default), with the raw returns, or GROSS_UP, which grosses up tax-exempt income.

Where to access

In GorilaCORE, the drawdown is available through the following endpoints:

• Read Drawdown: daily drawdown series of a portfolio.
• Read Economic Group Drawdown: the same series for an economic group, consolidating its portfolios.
• Read Security Drawdown: daily drawdown series of a security.

Each point of the response includes the date (referenceDate) and the drawdown value (drawdown), in decimal format.