- Home page
- How do I calculate PAMM Portfolio returns if a PAMM Account currency denomination differs from that of the portfolio?
How do I calculate PAMM Portfolio returns if a PAMM Account currency denomination differs from that of the portfolio?
Where there is a difference in currency denomination between PAMM Accounts and Portfolios, the portfolio returns will depend on both the returns for the PAMM Accounts which make up the portfolio in addition to the exchange rate between the corresponding currencies.
Calculating return for a USD portfolio which includes a EUR denominated account.
The portfolio’s return will be calculated according to changes in the equity denominated in USD.
Portfolio equity = equity in the dollar denominated PAMM Accounts + ( equity in the euro denominated PAMM Account x the EUR/USD rate )
As you can see from the formula above, the stronger the euro is, the larger the return in dollars will be. In such a case, the total return for the portfolio will increase.
Conversely, if the euro weakens against the dollar, the dollar denominated equity of the portfolio will decrease.
If you invest in a PAMM Account whose denomination differs from that of the portfolio, a conversion of the currencies will take place.
Currency conversions involve commission which is taken due to the spread difference (the difference between the rate of buying and the rate of selling a particular currency).
Calculation of the portfolio’s return with a currency conversion.
EUR/USD rate at the moment when the portfolio is created: 1.1/1.2.
Portfolio deposit: 1,000 USD.
Accounts which make up the portfolio:
- Dollar denominated PAMM Account of 500 USD;
- Euro denominated PAMM Account of 416.16 EUR bought at a rate of 1 EUR = 1.2 USD.
To calculate the portfolio return, we need convert the euro amount into dollars so as to have a figure in one currency denomination.
Since the selling rate of 1 EUR = 1.1 USD,
PAMM Portfolio equity = 500 USD + ( 416.16 EUR x 1.1 USD / EUR ) = 957.77 USD
As you can see from the example above, investing in a euro account means a partial loss due to the currency conversion which takes place.
Other than this, the returns on the portfolio are affected only by the returns of the PAMM Accounts which make up the portfolio.
Did you find the information you were looking for?
More Frequently Asked Questions about PAMM portfolios:
- What is a PAMM portfolio?
- How do I invest in a PAMM portfolio?
- How can I withdraw funds from a PAMM portfolio?
- How can I invest more funds into a PAMM portfolio?
- What is the PAMM portfolio builder?
- How can I add a PAMM account from the builder?
- How can I create and activate a PAMM portfolio?
- What's the difference between a public and a private PAMM portfolio?
- What is a PAMM Portfolio non-withdrawable balance?
- What is PAMM Portfolio equity for?
- How can I change the compositon of my PAMM Portfolio?
- What is a PAMM Portfolio request planner and how can I configure it?
- What documents are required in order to accept investments?
- How do I calculate the return on a PAMM portfolio if a PAMM account's currency denomination differs from that of the portfolio?
- What is the "balance"," equity" and "free equity" on PAMM portfolios?
- What is PAMM portfolio monitoring?