Why Cumulative Returns Can Differ from Open-Position P&L Details
Summary
The discussion explains why a backtest’s cumulative return can appear inconsistent with profit and loss shown in exported position details. The key distinction is that the export described here records stocks still held at the end of each day. It therefore omits the realized gains or losses from positions sold during that day. Adding only the displayed end-of-day holdings will not necessarily reproduce the strategy’s total return.
The example is a position bought on one day and sold on a later day at a profit: on the sale date, the stock is no longer in the closing holdings, so its gain does not appear in that day’s position-detail export. The explanation is qualitative and does not provide a full accounting formula or address fees, cash flows, or other return calculations. Its lesson is to distinguish realized trading P&L from the unrealized P&L of positions remaining open when reconciling backtest reports.
Key ideas
- End-of-day position exports may include only assets still held at the close.
- A position sold during the day can contribute realized P&L without appearing in closing holdings.
- Summing closing-position P&L alone may not reproduce cumulative strategy returns.
- Reconciliation should account for both realized P&L on closed trades and P&L on open positions.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.