The SmartRisk algorithms model past returns to work out the likelihood of severe falls in asset prices. Assigning probabilities to parameters that have influenced sell-offs, they estimate the average size of loss in the worst 0.5 percent of months. Unlike models based on Gaussian bell curves (which assume asset price returns occur with a normally distributed frequency), this method allows for the fact that, empirically, serious falls in the stock market occur far more often. Therefore, while the SmartRisk system doesn’t lay claim to clairvoyance and cannot predict a major downturn, it allows investors to build a more realistic estimate of potential losses.
Later in the article, Covisum's Director of Product Development Ron Piccinini, PhD points out that the subtle difference in meaning between gains and returns is important, “CAGR and reward-to-risk (Omega Ratio) are somewhat distant cousins. The Omega Ratio is the ratio of expected gain over expected losses, not expected return over expected losses. So, an investment can have a great CAGR, but if it takes a lot of losses to achieve it, it will have a lower ratio.”
Katie thrives on making an impact and achieving big goals. She believes that communication strategy has a major impact on business success. As a strategic communicator with a diverse background in non-profit, B2B, healthcare, and SaaS, Katie combines her expertise in strategy development, marketing and sales to spread the word about how Covisum can help advisors and institutions inform their clients of the best financial decisions.