Overview

Use Orion Risk Intelligence to test your model's resilience to factors that may affect your portfolios inside Orion Trading (Eclipse). Run stress tests from the model details page directly in Eclipse.

Running a stress testing scenario applies the forecasted changes in levers to the model, causing an impact on the portfolio. The net increase or decrease of your portfolio as a result of the movements is shown.

Viewing the Risk and Return Dashboard

IMPORTANT NOTE: You must have an Orion Risk Intelligence (ORI) login to view risk data in Eclipse. If you are subscribed to ORI, you can run stress tests for all models (advisor created and Community). If you are using a free trial of ORI, you can only run stress tests for Community models.

 

Sharpe Ratio: A measure that indicates the average return minus the risk-free return divided by the standard deviation of return on investment.

Max Drawdown: A maximum drawdown (MDD) is the maximum observed loss from a peak to a trough of a portfolio before a new peak is attained. Maximum drawdown is an indicator of downside risk over a specified time period.

Sortino Ratio: The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative portfolio returns—downside deviation—instead of the total standard deviation of portfolio returns. The Sortino ratio takes an asset or portfolio's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation.

Upside Risk: This is the maximum upside scenario outcome taken from selected scenarios.

Downside Risk: This is the maximum downside scenario outcome taken from selected scenarios.

5-Year Expected Return: The system first calculates the expected return for the portfolio by calculating the one-year weighted average return across all expected scenarios. Then, the one-year expected return is compounded to obtain a 5-year return estimate. Historically, major downside events occur roughly twice a decade, so this is an appropriate timeframe for comparison of long-term returns and downside scenario risk. 

Correlation Risk: The number at center is a measure of both correlation and concentration risk, computed based on the portfolio's full correlation matrix. The metric ranges between 0 and 1, with 0 representing an infinite number of perfectly uncorrelated positions and 1 being any number of perfectly correlated positions. Single position portfolios receive no scores, as there are no positions to compare against. 

Where to View the Stress Testing Grid

View any model's stress testing grid in Orion Trading by navigating to the Strategies tab:

• Select the Models tab
• Double-click any model to review
• Scroll down to the tab for Stress Testing
• When necessary, click the dropdown to view the grid

Update the stress test scenarios by clicking the dropdown above the grid. This opens a popup where you see all the themes. Simply click on a theme that interests you to review each potential scenario, and check any of the ones you wish to see the stress test for. Click the blue button at the bottom right to update the grid.