Understanding Backtested Performance Results

We believe in transparency and empowering you with information to make informed decisions. As part of this commitment, we want to provide you with a clear understanding of the backtested performance results presented for portfolios managed by DASTA Investments.

What is Backtesting?

Backtesting involves simulating a portfolio's performance based on historical data, to see how it would have performed had we been trading it in the past. Our approach involves reconstructing hypothetical stock allocations (based on our current strategies) for past dates and then calculating the resulting portfolio returns.

Methodology: How We Backtest

Portfolio Construction

We create hypothetical portfolios, represented as specific stock weightings (e.g., {AAPL 50%, GS 25%, XOM 25%}), for chosen historical dates and times. These portfolios reflect the allocations we believe would have been in place under our trading strategy at those times.

Return Calculation

With the portfolios and their respective dates and times established, we compute the returns for each portfolio over the subsequent time interval. This calculation uses both daily and intraday pricing data from Nasdaq and Polygon, adjusted for corporate actions such as dividends and spin-offs.

Total and Annualized Returns

The overall return across the backtest period is determined by compounding all of the individual portfolio returns. The annualized return, which we display in our app, represents the consistent yearly return that would give the total return over the whole backtest period. It's calculated using the formula: (1+TR)^(1/N) - 1, where TR is the total return and N is the number of years in the backtest period.

Important Considerations and Risks

Backtested results are historical simulations and do not guarantee future performance. Market conditions can change, affecting outcomes. Some of our backtests are short, and may not cover a variety of market regimes, leaving some strategies are untested under some market conditions. Strategies’ effectiveness may diminish over time for many reasons, such as regulatory or legal changes or market adaptation.

The results do not account for trading costs, market impact, or taxes. While we work hard to ensure the accuracy of our backtests, the results may be erroneous for various reasons, including but not limited to errors in pricing or corporate action data supplied to us by our vendors, inaccurate views of past trading conditions, or “bugs” within the backtesting software.

A user copying our portfolios may receive cash from dividends or other corporate actions. The user's choices on how and whether to reinvest this cash may lead to their performance differing from backtest performance or the performance of other users.