Risk AnalysisBy analyzing the risk in their portfolio, investors can gauge the likelihood of future fluctuations or financial losses. Like performance, risk must be considered relative to factors that are relevant to the portfolio such as specific indices, peer groups, or custom benchmarks.The most popular risk measure is standard deviation, which illustrates a portfolio’s volatility over a certain period.There are some cases in which higher volatility is desired to potentially achieve higher returns. In such scenarios, risk can be considered from other perspectives, including:Debt levels of underlying holdings and/or theirPortfolio drawdowns over multiple periods (drawdowns are explained in our blog on Portfolio Risk Management).Upside capture ratio – this is a measure of the portfolio’s performance in rising markets relative to a benchmark index. A value above 100 indicates that the portfolio has outperformed the benchmark during periods of positive benchmark returns. For instance, an upside capture ratio of 110 indicates that the portfolio outperformed the benchmark by 10% during the period in question.Portfolio’s This indicates the relationship between portfolio performance and broader market performance.Risk-Return AnalysisRisk-adjusted returns relate portfolio performance to the level of risk taken. This provides a measure of how well returns compare to the inherent investment risk. Some of the most common risk-adjusted performance ratios include the Sharpe and Sortino ratios – we have explored them in this blog on Risk Based Performance Measures.Other Important ConsiderationsIn addition to the ratios mentioned above, investors typically examine their portfolios from additional angles. For example, the dividend yield of an income-focused portfolio is typically reviewed against the yield offered by an index constructed of dividend-paying companies. Another example can be a value-oriented portfolio, which is reviewed against its benchmark in terms of valuations – be it from a P/E , P/B, or other ratio perspective.Tools Used in Portfolio AnalysisPortfolio PositioningPortfolio positioning describes how are the portfolio’s assets are spread across various asset classes, investment styles, company sizes (for equities), durations (i.e. the sensitivity to changes in interest rates) and credit quality (for fixed income), geographies and factors.Below is an example of the portfolio positioning for the Fidelity Multi Asset Income Fund.