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Combining Security NAV Series into a Portfolio NAV

Article Quant Q&A · Author: Stacey
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Summary

The document asks how to combine several securities’ NAV time series into one series for comparing simulation results. It presents an example that takes the arithmetic mean of three NAV values on each date, with each series starting near the same baseline, and asks whether this is adequate or whether a more robust method exists.

No answer or portfolio construction method is supplied, so the example should be read as a question rather than a recommendation. Averaging NAV levels implicitly treats the series as equally weighted and comparable in scale; the document does not discuss initial capital, changing weights, cash flows, missing dates, or how to combine underlying returns. Those omissions limit what can be concluded about whether the displayed aggregate represents a portfolio or is suitable for simulation comparisons.

Key ideas

  • The document asks how to aggregate multiple securities’ NAV histories for simulation comparisons.
  • It illustrates an equal arithmetic average of the NAV levels at each date.
  • It does not establish that averaging NAV levels is a robust portfolio aggregation method.
  • The example leaves weighting, capital allocation, and other aggregation details unspecified.

Tags

BacktestingPortfolio constructionStatistics
Full text
# Combining multiple securities' Net Asset Value time-series into one total NAV series


# Combining multiple securities' Net Asset Value time-series into one total NAV series












I have a number of individual securities that each have a Net Asset Value (NAV) time-series. For example:

```
              NAV1    NAV2    NAV3
30/10/2014  100.00  100.00  100.00
31/10/2014  100.09  100.34   99.20
03/11/2014  100.98   99.96   98.55
04/11/2014  100.76  100.94   99.55
05/11/2014   99.99  100.04   98.97
06/11/2014  100.41   99.54   99.90
07/11/2014   99.54   99.56  100.86
10/11/2014  100.44   99.36  100.39
11/11/2014  101.21   99.06  100.26
12/11/2014  100.99   99.87  100.72
13/11/2014  101.28  100.21  100.12
14/11/2014  101.57  100.73   99.54
```

Could someone let me know how I can combine the individual security NAVs into a total NAV time-series please?

Can I simply add the NAV's together for each date and divide by the number of securities eg:

```
              NAV1    NAV2    NAV3  combined NAV
30/10/2014  100.00  100.00  100.00        100.00
31/10/2014  100.09  100.34   99.20         99.88
03/11/2014  100.98   99.96   98.55         99.83
04/11/2014  100.76  100.94   99.55        100.42
05/11/2014   99.99  100.04   98.97         99.67
06/11/2014  100.41   99.54   99.90         99.95
07/11/2014   99.54   99.56  100.86         99.99
10/11/2014  100.44   99.36  100.39        100.06
11/11/2014  101.21   99.06  100.26        100.18
12/11/2014  100.99   99.87  100.72        100.53
13/11/2014  101.28  100.21  100.12        100.54
14/11/2014  101.57  100.73   99.54        100.61
```

or is there a more robust way to do it? The purpose of the total NAV would be to compare different simulation results

Thanks

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.