Portfolio level backtesting

[fundjunkie]

All,
Can someone explain to me why portfolio level backtesting is so important in a testing package as opposed to the ability to backtest multiple securities? To me, both things sound the same.

I understand that Wealth-lab has this feature while Metastock doesn't (does allow backtest of multiple securities though). As I'm considering a software purchase I want to understand it's significance. Any help will be greatly appreciated.


Thx,
D

 

[TWI]

It is a time saver. Diversification benefits are huge and it is better to be able to apply strategies to the basket than to run them on individual instruments and combine them manually. Either way you will want to do the portfolio testing as it is the only way you will understand your risk i.e. you want to know correlations between different investments or you may find all your drawdowns come at the same time and take you out of business.

 

[jmreeve]

Portfolio level backtesting, i.e testing a single strategy across a range of securities is very useful if you are planning to design a long term trend following system.

It gives you are larger sample of trades over which to evaluate the system performance.
If you do not plan to use LTTF then software that has this facility wont be of much benefit.