Measure Portfolio Return Asymmetry with fn_01601 (Skewness)

The Skewness function, "fn_01601," in MarketXLS helps you analyze the asymmetry in your portfolio’s return distribution. By looking at skewness, you can understand whether your portfolio returns have a pronounced tail to the right (positive skew) or to the left (negative skew). This insight can be crucial when evaluating risk and future performance potential.

Why Use This Function?

• Understand Risk Profile: Skewness highlights whether your returns are more likely to produce outlier gains or losses.
• Enhance Portfolio Analysis: Compare the skewness of multiple portfolios to identify which are more or less prone to asymmetric returns.
• Quick Computation: Easily integrate the function with your existing Excel workflows without extensive code.
• Default Period Handling: If you don’t specify a period, the function seamlessly defaults to 12.

How to Use in Excel

Skewness(portfolio, period)

1. In any cell, type =Skewness(.
2. For the first argument, choose the reference or name of your portfolio.
3. For the second argument, enter the period. If you skip it, 12 is used by default.
4. Press Enter to compute the portfolio’s skewness.

Parameters Explained

• "portfolio" can be a named range, a text identifier, or cell references that MarketXLS recognizes as a valid portfolio.
• "period" is generally a numeric value corresponding to the number of data points (for instance, 12 for monthly data in a 1-year timeframe, 6 for bi-monthly intervals, etc.).

Example Usage

Basic Examples

1. Using a Named Portfolio and Default Period

   • Suppose you have a portfolio named "MyPortfolio" in MarketXLS.
   • In any cell, type:
     =Skewness("MyPortfolio")
   • This calculates the skewness of "MyPortfolio" using the default period of 12.

2. Specifying a Custom Period

   • If you want to calculate skewness over 6 data intervals, enter:
     =Skewness("MyPortfolio", 6)
   • This returns the skewness based on 6 intervals worth of data.

3. Referencing a Portfolio Range Directly

   • If your portfolio data is in cells A2 through A20, use:
     =Skewness(A2:A20, 12)

Advanced Scenarios

1. Comparing Two Portfolios

   • Imagine you have "PortfolioA" and "PortfolioB." By running:
     =Skewness("PortfolioA", 12) and =Skewness("PortfolioB", 12)
     you can see which portfolio has a higher or lower skewness and make decisions based on potential return asymmetry.

2. Multi-Period Analysis

   • Use multiple cells to calculate skewness over different periods (e.g., 6, 12, 24). You can place them side by side to track how skewness changes with different time frames.

3. Integration with OtherExcel Functions

   • Combine Skewness with other MarketXLS or Excel functions (e.g., standard deviation or average return) to form a more complete analysis of your portfolio’s risk and return distribution.

4. Trading Strategy Examples

   • If you monitor the skewness for a high-yield bond portfolio, you might adjust your position sizes when the skewness indicates a heavier tail risk on one side.

Common Questions and Troubleshooting

1. What if I don’t provide a period?

   • The function defaults to 12, which typically represents monthly intervals for one year of data.

2. Why am I getting “NA” or an error message?

   • This can happen if the portfolio reference is invalid or if there is any error processing the request. Check your portfolio reference or licensing status.

3. Can I use negative or zero for the period argument?

   • Passing unusual values (e.g., negative numbers) is not recommended. While the function will typically return “NA” or a relevant error message, always provide a sensible period matching your data intervals.

4. What if my license is not valid?

   • The function will return a special message indicating an invalid license. Ensure your MarketXLS subscription is active and properly installed.

By incorporating the Skewness function (fn_01601) into your Excel workflow, you gain deeper insight into the distribution of your portfolio’s returns. This helps in managing risk effectively and guiding your investment decisions with a more complete picture of potential outcomes.