Uncompounded Drawdown
These two fields measure drawdown on cumulative returns that are summed rather than compounded. That is the drawdown that MinCDaR, MinMaxDrawdown, MinAverageDrawdown and MinUlcerIndex minimize, so these fields show the figure each of those methods optimized.
Mathematical Formulation
Drawdown
The running peak starts at zero, so a loss on the first day is already a drawdown.
The two fields
The first keeps the sign of max_drawdown (negative). The second is a positive number on the same Acerbi-Tasche fractional tail as CDaR (95%).
Reading it
Summed returns keep the optimization a linear programme. Compounded returns describe what an investor's wealth did. The two differ slightly, and the difference grows with volatility and with the length of the window.
Read max_drawdown and cdar_95 for the wealth path. Read these two to check the figure a drawdown method minimized.
Like every metric on FolioLab, this value describes the run window. It is a measurement of past returns, not a forecast of future ones.
Where FolioLab reports it
results.<method>.performance.max_drawdown_uncompounded: daily, over the run window.results.<method>.performance.cdar_95_uncompounded: daily, over the run window.results.<method>.performance.edar_95_uncompounded: the Entropic Drawdown-at-Risk at 95% on the same series. It is an upper bound on the uncompounded CDaR.
Which figure a method minimized. MinCDaR, MinEDaR and MinMaxDrawdown minimize a drawdown on this summed series, not on the compounded one. Their result carries objective_metric, which names the field above that holds the objective's own value: cdar_95_uncompounded, edar_95_uncompounded or max_drawdown_uncompounded. Read that field, not the compounded cdar_95, edar_95 or max_drawdown, to see what the method achieved. Another method can show a lower compounded figure on the same window.
Each value appears on the result page under Further Risk Measures, in the PDF and Excel reports, in the compare view and through the MCP explain_metric tool. A run stored before this measure existed does not carry it.
skfolio's drawdowns (uncompounded is its default) and riskfolio-lib 7.0.1's MDD_Abs and CDaR_Abs agree with FolioLab's values to rounding.
References
- Chekhlov, A., Uryasev, S., & Zabarankin, M. (2005). "Drawdown Measure in Portfolio Optimization." International Journal of Theoretical and Applied Finance, 8(1), 13-58.
Not investment advice. Past performance is not indicative of future results.