Frequently Asked Questions About Diversiview

Diversiview is a unique investment analysis and optimisation software, that enables retail investors and professional investment advisors to take their investment portfolios to the next performance level.

Users can analyse mixed investment portfolios for free, and calculate critical portfolio indicators including portfolio return, portfolio volatility, portfolio Alpha, portfolio Beta, and portfolio Sharpe ratio. Furthermore, they can visualise their portfolio’s risk-return position compared with thousands of other potential positions and figure out whether the current portfolio composition helps them achieve their financial goals. Last but not least, users can freely visualise the granular diversification, at investment level.

From there, users have the option to use credit points to optimise their portfolios in several ways:

-   by calculating the weightings that can produce a portfolio position with minimum total risk (volatility),

-   by calculating the weightings that can produce the optimal portfolio position (that maximises the total expected return while maximising the total risk/volatility), or

-   by finding the weightings that give efficient portfolio positions (that maximise the portfolio expected return for a given level of portfolio risk) – that is, positions on the Efficient Frontier for that set of investments.

This way, the user has complete control of how their portfolio is constructed and can fine tune the composition using a personalised allocation approach towards the own goal.

With ability to analyse and optimise mixed portfolios (AUS and US listed stocks, unlisted investment funds and other asset types) of up to 40 investments, this is a unique application in the wealth management space.

Yes, Diversiview is 100% owned by LENSELL GROUP PTY LTD (ACN 646 467 941), a 100% Australian owned company.

Diversiview is unique.

There is no other tool on the market that allows self-directed investors to: (i) calculate their portfolio’s volatility, return and other performance indicators, (ii) visualise the granular, security-level diversification and (iii) take steps to optimise the asset allocation using state of the art technology – all in just a few clicks.

Contact us with any questions about Diversiview and we will be happy to chat!

No, Diversiview is not an investment platform nor a trading application.

Diversiview is the #1 Portfolio Planning and Optimisation tool that enables users to plan, review and refine their own investment portfolios to suit their requirements and risk profiles.

By providing unique portfolio level insights, as well as the ability to understand the true degree of portfolio diversification and a way to balance portfolios for specific goals, Diversiview fills the gap between investors and investing platforms, so investors can design diversified investment portfolios with confidence.

Once you are happy with the portfolio you designed and/or optimised in Diversiview, you can take it to your preferred trading application.

Diversiview is a global application. It is currently working with all ASX listed securities, the top 1000 US listed securities (NASDAQ and NYSE), major securities and over 150 unlisted investment funds.

We use a licensed ASX, NASDAQ, NYSE reseller for all listed securities. Data is adjusted for dividends, stock splits and other major events.

We use crypto prices from existing public crypto exchanges.

We use publicly available data for unlisted products.

For non-financial performance data, we use open government data and other public institutional data, in Australia and overseas.

Our algorithms are based on established financial theories and concepts, including the Portfolio Selection Theory, also known as the Modern Portfolio theory.

This theory was introduced by the Nobel prize winner Harry Markowitz in 1952. It puts forward the concepts of diversification and its impact on portfolio risk.

We use AI and optimisation techniques for our unique Portfolio Balancing and Efficient Frontier Discovery features.

The team behind Diversiview has extensive experience in computer science, software engineering, economics, cybernetics, accounting, and finance.

All models and algorithms used are research-based and thoroughly tested.

As many know, past performance cannot guarantee future performance, but it can provide a reasonable expectation.

Hence, portfolio return is an expected value, calculated based on 3 years of daily historical returns*. It indicates the annual rate of return you could expect from your portfolio, and it is calculated as the weighted average of the expected returns of the individual investments.

For each individual investment, the expected return is the geometric (or compound) average of that investment’ returns for the past 3 years*.

You can find the Portfolio Return value on the Diversiview analysis page, under the ‘Performance & Benchmark’ section.

Visit Diversiview’s YouTube channel and check out our explanatory videos.

*We use 3 years of daily historical returns to get a near future estimate. Longer horizons increase the uncertainty of the expected performance.

Portfolio Risk, also known as Portfolio Volatility, shows the potential fluctuation of the expected returns.

A high portfolio risk means that the returns are expected to be volatile and unstable, so you might suffer losses in bear markets.

For a personalised portfolio, you need to match the portfolio risk with your own risk tolerance.

YPortfolio risk is calculated as the standard deviation of the portfolio return, which considers the risk (volatility) of the individual investments, their weights in your portfolio and the granular correlations between pairs individual investments. See the formula Portfolio Standard Deviation and check out our explanatory videos.

Portfolio Beta indicates portfolio’s volatility compared with the entire market*. That is, a Beta higher than 1 shows that the portfolio is more volatile than the entire market, while a Beta lower than 1 indicates that the portfolio is less volatile than the entire market.

Beta is a measure of the systematic risk. That is, the portion of total portfolio risk that is due to external factors that affect almost all investments (e.g., wars, recessions, pandemics or even Governments monetary and economic policies).

Systematic risk cannot be reduced through diversification, as opposed to the unsystematic risk that is investment-specific (business risk) and can be reduced through diversification. Read more here.

*Diversiview uses the ALL ORDS (XAO) index to represent the entire market. XAO includes the top 500 Australian listed companies by market capitalisation.

You can find the Portfolio Beta value on the Diversiview analysis page, under the ‘Performance & Benchmark‘ section.

Visit Diversiview’s YouTube channel and check out our explanatory videos.

Portfolio Alpha indicates the difference between the portfolio’s expected return and the expected return of the entire market*. That is, a positive Alpha shows how much more the portfolio is expected to earn compared with the entire market.

Alpha is calculated using Jensen’s measure (see formula here) and is always considered in conjunction with Portfolio Beta. Investors generally aim to get a good portfolio performance (i.e., a positive Alpha) for the level of portfolio volatility indicated by Beta.

*For the purpose of Alpha calculations using Jensen’s method Diversiview uses Australian Government 10 Year Bond yield (most current value available here). The ALL ORDS (XAO) index is taken to represent the entire Australian market.

You can find the Portfolio Alpha value on the Diversiview analysis page, under the ‘Performance & Benchmark’ section.

Visit Diversiview’s YouTube channel and check out our explanatory videos.

Sharpe ratio is a widely used method for calculating the risk-adjusted return and a measurement of the portfolio’s performance per unit of portfolio’s volatility.

A portfolio that is well diversified will have a Sharpe ratio higher than a non-diversified portfolio, and investors generally look for a Sharpe ratio around or above 1.

You can find the Sharpe Ratio for your portfolio on the Diversiview analysis page, under the ‘Performance & Benchmark’ section.

Visit Diversiview’s YouTube channel and check out our explanatory videos.

Different investments, each with their own risk and return, can be combined in many ways (that is, with different weights). Each combination is a unique portfolio position, that has a unique portfolio risk & portfolio return combination.

There could be thousands, tens of thousands or even millions of portfolio positions, depending on the size of the portfolio (i.e., the number of individual investments). The multitude of portfolio positions create the Portfolio Universe®.

You can find the Portfolio Universe on the analysis page under the section ‘Portfolio’s Position in relation to the Efficient Frontier (the blue dots diagram).

In 1952, Nobel Prize laureate Harry Markowitz introduced the concept of “efficient risk-return combinations”.

He showed that, from the multitude of portfolio positions available for any set of securities, only some are ‘efficient’ and placed on what is now known as the ‘Efficient Frontier’. That is, the portfolio positions on the frontier have the highest return for the level of risk taken.

On the analysis page, the section ‘Portfolio’s Position in relation to the Efficient Frontier’ shows where your current portfolio position (i.e., for the given asset allocation) is placed in relation to other positions possible for the same set of securities, and especially in relation to the efficient positions on the Efficient Frontier.

Portfolio diversification is a concept introduced by Harry Markowitz in 1952 in the Modern Portfolio theory.

It refers to the strategy of spreading investments across different asset types and industry groups, to minimise the risk that the entire portfolio may fail. That is because securities from the same industry group or from different industry groups may be correlated - that is, their returns may respond in the same way to various market events.

By selecting securities that are less correlated (that is, that may respond differently to market events) the total portfolio risk will be less than the sum of risks of the individual securities.

Ideally, in a well-diversified portfolio, securities should not be correlated at all, or they should be negatively correlated. That is almost impossible to achieve in normal markets where companies are connected, so in the end the secret of diversification lies in the ability to select securities as little correlated as possible.

Diversification rating is a number representing the strength of diversification for your portfolio.

The maximum diversification rating is 5, and that is achieved when all correlations between securities in the portfolio are zero (securities are not correlated at all) or negative (securities are negatively correlated).

Any existing positive and strong positive correlations are penalized as they do not contribute to the real target of diversification which is to reduce the portfolio risk.

You can find the Diversification Rating value on the Diversiview analysis page, under the ‘Diversification Deep Dive’ section.

Granular Diversification Diagram is an interactive, visual network diagram, that shows the correlations between pairs of individual securities in the portfolio.

On the diagram the nodes represent the individual investments, while the lines show the correlations between those investments, based on the immediate past 10 years of share price returns.

The nodes and the lines are colour coded: for nodes (investments) the colours are based on the size (market cap) of the investment, and for lines the colours are based on the strength of the correlations between two individual investments. You can find the legends explaining the colours underneath the diagram area.

For large portfolios you can use the filters on the left to filter out some of the correlations and focus on what’s of interest to you.

When you click on any security in the Granular Diversification Diagram, a popup will provide security specific information, including:

• Security name, industry and weight in the portfolio
• Legal Entity Identifier, if available, for the company that issued that security
• Average return for the past 3 years
• Risk (volatility of returns), calculated as the standard deviation of the returns for the past 3 years
• Beta for the security for the past 3 years
• Top 3 securities that are least correlated with the security of interest, from the same industry
• Top 3 securities that have the highest average return, from the same industry
• Non-financial performance information, including carbon emissions

Minimum Variance Portfolio (MVP), also known as Minimum Risk Portfolio is the portfolio position with the lowest total portfolio risk.

On the Portfolio Universe® diagram MVP is the leftmost point.

You can calculate the Minimum Variance Portfolio from the Diversiview analysis page. Scroll down to the ‘Explore your portfolio’ section and click on the “Balance to Minimum Risk” button.

Note 1: If you use the default weighting values, the position with the absolute lowest possible risk will be given. If you change the minimum / maximum weighting values, the portfolio position with lowest risk within those constraints will be given.

Note 2: While the results of the balancing algorithm are rigorously scientific and thoroughly tested from a mathematical perspective, we do not claim at any stage that the calculated weights are the best for your personal circumstances. You should not take any action regarding changing the portfolio composition without doing further research and/or discussing with a finance professional. We accept no responsibility for any claim, loss or damage as a result of using these results.

Optimal Portfolio is the portfolio position (i.e., the combination of securities’ weights in your portfolio) that minimises the total portfolio risk and maximises the total portfolio return at the same time.

You can calculate the Optimal Portfolio from the Diversiview analysis page. Scroll down to the ‘Explore your current portfolio’ section and click on the “Balance to Max return & Min risk” button.

Note 1: If you use the default weighting values, the absolute optimal portfolio position will be given. If you change the minimum / maximum weighting values, the optimal portfolio position within those constraints will be given.

Note 2: While the results of the balancing algorithm are rigorously scientific and thoroughly tested from a mathematical perspective, we do not claim at any stage that the calculated weights are the best for your personal circumstances. You should not take any action regarding changing the portfolio composition without doing further research and/or discussing with a finance professional. We accept no responsibility for any claim, loss or damage as a result of using these results.

Each Portfolio Universe has an Efficient Frontier (see question above). That is, the set of portfolio positions that are efficient, i.e., they give the maximum expected return for a given level of risk.

Diversiview gives you the opportunity to travel along that frontier for your portfolio and pick the position that suits you best.

Click on ‘Find Efficient Frontier positions’ button in the ‘Explore your current portfolio’ section. Select the level of risk you are comfortable with and the maximum return for that level will be shown.

Once you are happy with the position, a new analysis will be run.

The new analysis page will show that asset allocation (portfolio composition) that has the maximum return for that level of risk - within the specifies constraints, if any.

Diversiview is free to use to analyse your investment portfolios. Simply sign up for a free account.

From your account dashboard you can click on ”New analysis” and follow the steps to enter your portfolio’s holdings and analyse it.

From the analysis page you can pay for some add-ons that are entirely optional

Yes, you can upload your portfolio composition from a CSV file

Once you click on “New analysis” in your dashboard and get to the Order page, you will be able to upload your portfolio from a CSV file.

Diversiview integrates with Sharesight, the premier portfolio tracking and reporting platform.

For subscribed Diversiview users, you can simply login to your account. In your dashboard you will see a button ‘Import from Sharesight’.

Login to your Sharesight account and select which portfolio you want to import.

The portfolio will be imported, and a new analysis will be created* for you in the dashboard (refresh the page if you don’t see the new analysis).

*Note that only securities available for analysis in Diversiview will be imported. All other securities that are not available yet (e.g., from an overseas stock exchange) will be shown as ‘OTHER’.

Visit Diversiview’s YouTube channel and check out our explanatory videos.

New features are continually added to Diversiview, to help users plan, review and optimise their portfolio with data-driven confidence.

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