This is Andes’ proprietary Risk Tolerance Test, which maps directly to one of your model portfolios. The analytics behind the upside (green) and downside (red) bar charts represent the range of outcomes that are likely to occur 80% of the time.
Andes believes that showing absolute highs and lows can exaggerate potential outcomes. Instead, using an 80% confidence interval provides a more realistic view of expected performance by avoiding extreme scenarios that are less likely to occur.
We assume returns follow a normal distribution, defined by the mean (target return) and standard deviation (target volatility). Using an 80% confidence interval corresponds to 1.28 standard deviations, calculated as follows:
Upside = Target return + 1.28 × Target volatility
Downside = Target return − 1.28 × Target volatility
Note that this formula applies when the time period is set to 1 year. For shorter periods, such as 6 months, the values are adjusted accordingly.
In the 1-year return graph below, the Classic U.S. Growth 70/30 model shows an expected range between approximately +20% and −10%. These ranges help set realistic expectations for portfolio performance and support more informed decisions based on risk tolerance.
Showing worst-case scenarios in Andes
If you need to share worst-case scenarios with clients, Andes provides two useful visualizations: the Stress Test and Drawdown graphs. To access them, follow the steps below.
1. Navigate to Model Management → Models & Blends.
2. Open your model then select the Analytics & Stress Testing tab, scroll down:
If you have any questions, you can submit a support ticket or email us at: support@andesrisk.io.