Technical analysis by thequantscience about Symbol BTC on 3/3/2025

What is a benchmark?A benchmark is an index or a basket of assets used to evaluate the performance of an investment portfolio In the context of portfolio analysis the benchmark serves as a point of comparison to determine whether a fund a strategy or an investment is performing better worse or in line with the reference market.In the current chart, Bitcoin (BTCUSDT) is displayed with a solid and larger blue line in relation to other cryptocurrencies for the current period.Benchmarks are essential tools for institutional and private investors as they allow measuring the effectiveness of asset allocation choices and risk management Additionally they help determine the added value of an active manager compared to a passive market replication strategy.Benchmark analysis example: TSLA - NDX Benchmark analysis example: TSLA - AAPL - NDX What is the purpose of a benchmarkThe use of a benchmark in portfolio analysis has several objectives1) Performance Evaluation: Provides a parameter to compare the portfolio's return against the market or other funds2) Risk Analysis: Allows comparing the volatility of the portfolio against that of the benchmark offering a measure of risk management3) Performance Attribution: Helps distinguish between returns derived from asset selection and those linked to market factors4) Expectation Management: Supports investors and managers in assessing whether a portfolio is meeting expected return objectives5) Strategy Control: If a portfolio deviates excessively from the benchmark it may signal the need to review the investment strategyHow to select an appropriate benchmark?The choice of the correct benchmark depends on several factors:1) Consistency with Portfolio Objective: The benchmark should reflect the market or sector in which the portfolio operates2) Representativeness of Portfolio Assets: The benchmark should have a composition similar to that of the portfolio to ensure a fair comparison3) Transparency and Data Availability: It must be easily accessible and calculated with clear and public methodologies4) Stability Over Time: A good benchmark should not be subject to frequent modifications to ensure reliable historical comparison5) Compatible Risk and Return: The benchmark should have a risk and return profile similar to that of the portfolioMost used benchmarksThere are different benchmarks based on asset type and reference market Here are some of the most common.EquitySP500 Representative index of the 500 largest US companies.MSCI World Includes companies from various developed countries ideal for global strategiesFTSEMIB Benchmark for the Italian stock marketNDX Represents the largest technology and growth companiesBondsBarclays Global Aggregate Bond Index Broad benchmark for the global bond marketJP Morgan Emerging Market Bond Index EMBI Benchmark for emerging market debt[*]BofA Merrill Lynch US High Yield Index Representative of the high-yield bond market junk bondsMixed or Balanced6040 Portfolio Benchmark 60 equities SP 500 and 40 bonds Bloomberg US Aggregate used to evaluate balanced portfoliosMorningstar Moderate Allocation Index Suitable for moderate-risk investment strategiesAlternativeHFRI Fund Weighted Composite Index Benchmark for hedge fundsGoldman Sachs Commodity Index GSCI Used for commodity-related strategiesBitcoin Index CoinDesk BPI Benchmark for cryptocurrenciesA reference benchmark is essential in portfolio analysis to measure performance manage risk and evaluate investment strategies The selection of an appropriate benchmark must be consistent with the strategy and market of the portfolio to ensure meaningful comparison.Understanding and correctly selecting the benchmark allows investors to optimize their decisions and improve long-term results.