Fix drawdown calculation and revert unnecesary changes

Author: JosueNina

Common/Statistics/AlgorithmPerformance.cs

@@ -44,7 +44,8 @@ public class AlgorithmPerformance
         /// </summary>
         /// <param name="trades">The list of closed trades</param>
         /// <param name="profitLoss">Trade record of profits and losses</param>
-        /// <param name="equityPoints">The equity curve series points</param>
+        /// <param name="equity">The list of daily equity values</param>
+        /// <param name="equityPoints">The equity curve OHLC series points, used for drawdown calculation</param>
         /// <param name="portfolioTurnover">The algorithm portfolio turnover</param>
         /// <param name="listPerformance">The list of algorithm performance values</param>
         /// <param name="listBenchmark">The list of benchmark values</param>
@@ -56,6 +57,7 @@ public class AlgorithmPerformance
         public AlgorithmPerformance(
             List<Trade> trades,
             SortedDictionary<DateTime, decimal> profitLoss,
+            SortedDictionary<DateTime, decimal> equity,
             List<ISeriesPoint> equityPoints,
             SortedDictionary<DateTime, decimal> portfolioTurnover,
             List<double> listPerformance,
@@ -67,7 +69,7 @@ public AlgorithmPerformance(
             int tradingDaysPerYear)
         {
             TradeStatistics = new TradeStatistics(trades);
-            PortfolioStatistics = new PortfolioStatistics(profitLoss, equityPoints, portfolioTurnover, listPerformance, listBenchmark, startingCapital,
+            PortfolioStatistics = new PortfolioStatistics(profitLoss, equity, equityPoints, portfolioTurnover, listPerformance, listBenchmark, startingCapital,
                 riskFreeInterestRateModel, tradingDaysPerYear, winningTransactions, losingTransactions);
             ClosedTrades = trades;
         }

Common/Statistics/PortfolioStatistics.cs

@@ -196,7 +196,8 @@ public class PortfolioStatistics
         /// Initializes a new instance of the <see cref="PortfolioStatistics"/> class
         /// </summary>
         /// <param name="profitLoss">Trade record of profits and losses</param>
-        /// <param name="equityPoints">The equity curve series points</param>
+        /// <param name="equity">The list of daily equity values</param>
+        /// <param name="equityPoints">The equity curve OHLC series points, used for drawdown calculation</param>
         /// <param name="portfolioTurnover">The algorithm portfolio turnover</param>
         /// <param name="listPerformance">The list of algorithm performance values</param>
         /// <param name="listBenchmark">The list of benchmark values</param>
@@ -210,6 +211,7 @@ public class PortfolioStatistics
         /// <param name="lossCount">The number of losses</param>
         public PortfolioStatistics(
             SortedDictionary<DateTime, decimal> profitLoss,
+            SortedDictionary<DateTime, decimal> equity,
             List<ISeriesPoint> equityPoints,
             SortedDictionary<DateTime, decimal> portfolioTurnover,
             List<double> listPerformance,
@@ -221,7 +223,7 @@ public PortfolioStatistics(
             int? lossCount = null)
         {
             StartEquity = startingCapital;
-            EndEquity = Statistics.GetClose(equityPoints.LastOrDefault());
+            EndEquity = equity.LastOrDefault().Value;
 
             if (portfolioTurnover.Count > 0)
             {
@@ -278,24 +280,19 @@ public PortfolioStatistics(
 
             if (startingCapital != 0)
             {
-                TotalNetProfit = EndEquity / startingCapital - 1;
+                TotalNetProfit = equity.Values.LastOrDefault() / startingCapital - 1;
             }
 
-            if (equityPoints.Count >= 2)
-            {
-                var lastTime = equityPoints.Last().Time;
-                var firstTime = equityPoints.First().Time;
-                var fractionOfYears = (decimal)(lastTime - firstTime).TotalDays / 365;
-                CompoundingAnnualReturn = Statistics.CompoundingAnnualPerformance(startingCapital, EndEquity, fractionOfYears);
-            }
+            var fractionOfYears = (decimal)(equity.Keys.LastOrDefault() - equity.Keys.FirstOrDefault()).TotalDays / 365;
+            CompoundingAnnualReturn = Statistics.CompoundingAnnualPerformance(startingCapital, equity.Values.LastOrDefault(), fractionOfYears);
 
             AnnualVariance = Statistics.AnnualVariance(listPerformance, tradingDaysPerYear).SafeDecimalCast();
             AnnualStandardDeviation = (decimal)Math.Sqrt((double)AnnualVariance);
 
             var benchmarkAnnualPerformance = GetAnnualPerformance(listBenchmark, tradingDaysPerYear);
             var annualPerformance = GetAnnualPerformance(listPerformance, tradingDaysPerYear);
 
-            var riskFreeRate = riskFreeInterestRateModel.GetAverageRiskFreeRate(equityPoints.Select(x => x.Time));
+            var riskFreeRate = riskFreeInterestRateModel.GetAverageRiskFreeRate(equity.Select(x => x.Key));
             SharpeRatio = AnnualStandardDeviation == 0 ? 0 : Statistics.SharpeRatio(annualPerformance, AnnualStandardDeviation, riskFreeRate);
 
             var annualDownsideDeviation = Statistics.AnnualDownsideStandardDeviation(listPerformance, tradingDaysPerYear).SafeDecimalCast();

Common/Statistics/Statistics.cs

@@ -277,6 +277,9 @@ public static DrawdownMetrics CalculateDrawdownMetrics(List<ISeriesPoint> equity
                     var point = equityPoints[i];
                     GetHighLow(point, out var high, out var low);
 
+                    // Use the previous peak to calculate the drawdown
+                    var previousPeak = peakEquity;
+
                     // Update peak equity using the high price
                     if (high >= peakEquity)
                     {
@@ -291,8 +294,8 @@ public static DrawdownMetrics CalculateDrawdownMetrics(List<ISeriesPoint> equity
                         peakDate = point.Time;
                     }
 
-                    // Calculate current drawdown from peak using the low price
-                    var currentDrawdown = (low / peakEquity) - 1;
+                    // Calculate current drawdown from previous peak using the low price
+                    var currentDrawdown = (low / previousPeak) - 1;
                     if (currentDrawdown < 0)
                     {
                         maxDrawdown = Math.Min(maxDrawdown, currentDrawdown);

Common/Statistics/StatisticsBuilder.cs

@@ -64,12 +64,14 @@ public static StatisticsResults Generate(
             IRiskFreeInterestRateModel riskFreeInterestRateModel,
             int tradingDaysPerYear)
         {
-            var firstDate = equityPoints.Count > 0 ? equityPoints.First().Time.Date : default;
-            var lastDate = equityPoints.Count > 0 ? equityPoints.Last().Time.Date : default;
+            var equity = ChartPointToDictionary(equityPoints);
 
-            var totalPerformance = GetAlgorithmPerformance(firstDate, lastDate, trades, profitLoss, equityPoints, pointsPerformance, pointsBenchmark,
+            var firstDate = equity.Keys.FirstOrDefault().Date;
+            var lastDate = equity.Keys.LastOrDefault().Date;
+
+            var totalPerformance = GetAlgorithmPerformance(firstDate, lastDate, trades, profitLoss, equity, equityPoints, pointsPerformance, pointsBenchmark,
                 pointsPortfolioTurnover, startingCapital, transactions, riskFreeInterestRateModel, tradingDaysPerYear);
-            var rollingPerformances = GetRollingPerformances(firstDate, lastDate, trades, profitLoss, equityPoints, pointsPerformance, pointsBenchmark,
+            var rollingPerformances = GetRollingPerformances(firstDate, lastDate, trades, profitLoss, equity, equityPoints, pointsPerformance, pointsBenchmark,
                 pointsPortfolioTurnover, startingCapital, transactions, riskFreeInterestRateModel, tradingDaysPerYear);
             var summary = GetSummary(totalPerformance, estimatedStrategyCapacity, totalFees, totalOrders, accountCurrencySymbol);
 
@@ -83,7 +85,8 @@ public static StatisticsResults Generate(
         /// <param name="toDate">The final date of the range</param>
         /// <param name="trades">The list of closed trades</param>
         /// <param name="profitLoss">Trade record of profits and losses</param>
-        /// <param name="equityPoints">The equity curve series points</param>
+        /// <param name="equity">The list of daily equity values</param>
+        /// <param name="equityPoints">The equity curve OHLC series points, used for drawdown calculation</param>
         /// <param name="pointsPerformance">The list of algorithm performance values</param>
         /// <param name="pointsBenchmark">The list of benchmark values</param>
         /// <param name="pointsPortfolioTurnover">The list of portfolio turnover daily samples</param>
@@ -99,6 +102,7 @@ private static AlgorithmPerformance GetAlgorithmPerformance(
             DateTime toDate,
             List<Trade> trades,
             SortedDictionary<DateTime, decimal> profitLoss,
+            SortedDictionary<DateTime, decimal> equity,
             List<ISeriesPoint> equityPoints,
             List<ISeriesPoint> pointsPerformance,
             List<ISeriesPoint> pointsBenchmark,
@@ -108,13 +112,15 @@ private static AlgorithmPerformance GetAlgorithmPerformance(
             IRiskFreeInterestRateModel riskFreeInterestRateModel,
             int tradingDaysPerYear)
         {
+            var periodEquity = new SortedDictionary<DateTime, decimal>(equity.Where(x => x.Key.Date >= fromDate && x.Key.Date < toDate.AddDays(1)).ToDictionary(x => x.Key, y => y.Value));
             var periodEquityPoints = equityPoints?.Where(x => x.Time.Date >= fromDate && x.Time.Date < toDate.AddDays(1)).ToList();
 
             // No portfolio equity for the period means that there is no performance to be computed
-            if (periodEquityPoints.IsNullOrEmpty())
+            if (periodEquity.IsNullOrEmpty())
             {
                 return new AlgorithmPerformance();
             }
+
             var periodTrades = trades.Where(x => x.ExitTime.Date >= fromDate && x.ExitTime < toDate.AddDays(1)).ToList();
             var periodProfitLoss = new SortedDictionary<DateTime, decimal>(profitLoss.Where(x => x.Key >= fromDate && x.Key.Date < toDate.AddDays(1)).ToDictionary(x => x.Key, y => y.Value));
             var periodWinCount = transactions.WinningTransactions.Count(x => x.Key >= fromDate && x.Key.Date < toDate.AddDays(1));
@@ -139,9 +145,9 @@ private static AlgorithmPerformance GetAlgorithmPerformance(
             var listBenchmark = benchmarkEnumerable.Select(x => x.Value).ToList();
             var listPerformance = PreprocessPerformanceValues(performance).Select(x => x.Value).ToList();
 
-            var runningCapital = equityPoints.Count == periodEquityPoints.Count ? startingCapital : Statistics.GetClose(periodEquityPoints.First());
+            var runningCapital = equity.Count == periodEquity.Count ? startingCapital : periodEquity.Values.FirstOrDefault();
 
-            return new AlgorithmPerformance(periodTrades, periodProfitLoss, periodEquityPoints, portfolioTurnover, listPerformance, listBenchmark,
+            return new AlgorithmPerformance(periodTrades, periodProfitLoss, periodEquity, periodEquityPoints, portfolioTurnover, listPerformance, listBenchmark,
                 runningCapital, periodWinCount, periodLossCount, riskFreeInterestRateModel, tradingDaysPerYear);
         }
 
@@ -152,7 +158,8 @@ private static AlgorithmPerformance GetAlgorithmPerformance(
         /// <param name="lastDate">The last date of the total period</param>
         /// <param name="trades">The list of closed trades</param>
         /// <param name="profitLoss">Trade record of profits and losses</param>
-        /// <param name="equityPoints">The equity curve series points</param>
+        /// <param name="equity">The list of daily equity values</param>
+        /// <param name="equityPoints">The equity curve OHLC series points, used for drawdown calculation</param>
         /// <param name="pointsPerformance">The list of algorithm performance values</param>
         /// <param name="pointsBenchmark">The list of benchmark values</param>
         /// <param name="pointsPortfolioTurnover">The list of portfolio turnover daily samples</param>
@@ -168,6 +175,7 @@ private static Dictionary<string, AlgorithmPerformance> GetRollingPerformances(
             DateTime lastDate,
             List<Trade> trades,
             SortedDictionary<DateTime, decimal> profitLoss,
+            SortedDictionary<DateTime, decimal> equity,
             List<ISeriesPoint> equityPoints,
             List<ISeriesPoint> pointsPerformance,
             List<ISeriesPoint> pointsBenchmark,
@@ -187,7 +195,7 @@ private static Dictionary<string, AlgorithmPerformance> GetRollingPerformances(
                 foreach (var period in ranges)
                 {
                     var key = $"M{monthPeriod}_{period.EndDate.ToStringInvariant("yyyyMMdd")}";
-                    var periodPerformance = GetAlgorithmPerformance(period.StartDate, period.EndDate, trades, profitLoss, equityPoints, pointsPerformance,
+                    var periodPerformance = GetAlgorithmPerformance(period.StartDate, period.EndDate, trades, profitLoss, equity, equityPoints, pointsPerformance,
                         pointsBenchmark, pointsPortfolioTurnover, startingCapital, transactions, riskFreeInterestRateModel, tradingDaysPerYear);
                     rollingPerformances[key] = periodPerformance;
                 }

Research/QuantBook.cs

@@ -821,7 +821,8 @@ public PyDict GetPortfolioStatistics(PyObject dataFrame)
                 }
 
                 // Convert the double into decimal
-                var equityPoints = dictEquity.Select(kvp => (ISeriesPoint)new ChartPoint(kvp.Key, (decimal)kvp.Value)).ToList();
+                var equity = new SortedDictionary<DateTime, decimal>(dictEquity.ToDictionary(kvp => kvp.Key, kvp => (decimal)kvp.Value));
+                var equityPoints = equity.Select(kvp => (ISeriesPoint)new ChartPoint(kvp.Key, kvp.Value)).ToList();
                 var profitLoss = new SortedDictionary<DateTime, decimal>(dictPL.ToDictionary(kvp => kvp.Key, kvp => double.IsNaN(kvp.Value) ? 0 : (decimal)kvp.Value));
 
                 // Gets the last value of the day of the benchmark and equity
@@ -835,7 +836,7 @@ public PyDict GetPortfolioStatistics(PyObject dataFrame)
                 BaseSetupHandler.SetBrokerageTradingDayPerYear(algorithm: this);
 
                 // Compute portfolio statistics
-                var stats = new PortfolioStatistics(profitLoss, equityPoints, new(), listPerformance, listBenchmark, startingCapital, RiskFreeInterestRateModel,
+                var stats = new PortfolioStatistics(profitLoss, equity, equityPoints, new(), listPerformance, listBenchmark, startingCapital, RiskFreeInterestRateModel,
                     Settings.TradingDaysPerYear.Value);
 
                 result.SetItem("Average Win (%)", Convert.ToDouble(stats.AverageWinRate * 100).ToPython());

Tests/Common/Statistics/DrawdownRecoveryTests.cs

@@ -40,7 +40,10 @@ public void DrawdownMetricsMaximumRecoveryTimeTests(List<decimal> data, decimal
         [Test]
         public void CandlestickUsesHighForPeakAndLowForDrawdown()
         {
-            // Day 2 High=105 sets the peak: Low=80 -> drawdown = (80/105) - 1 --> 0.24
+            // Day 1: peak = 100
+            // Day 2: High=105 updates peak, but drawdown is measured against the previous peak
+            // not the same bar High, because we don't know which came first.
+            // drawdown = (80 / 100) - 1 = -0.2
             var startDate = new DateTime(2025, 1, 1);
 
             var points = new List<ISeriesPoint>
@@ -52,7 +55,7 @@ public void CandlestickUsesHighForPeakAndLowForDrawdown()
 
             var metrics = QuantConnect.Statistics.Statistics.CalculateDrawdownMetrics(points);
 
-            Assert.AreEqual(0.24m, metrics.Drawdown);
+            Assert.AreEqual(0.2m, metrics.Drawdown);
         }
 
         [Test]

Tests/Common/Statistics/PortfolioStatisticsTests.cs

@@ -148,7 +148,7 @@ public void PortfolioStatisticsDoesNotFailWhenAnnualPerformanceIsLarge()
             var riskFreeInterestRateModel = new InterestRateProvider();
             var tradingDaysPerYear = 252;
 
-            Assert.DoesNotThrow(() => new PortfolioStatistics(profitLoss, new List<ISeriesPoint>(), portfolioTurnover, listPerformance, listBenchmark, startingCapital, riskFreeInterestRateModel, tradingDaysPerYear));
+            Assert.DoesNotThrow(() => new PortfolioStatistics(profitLoss, new SortedDictionary<DateTime, decimal>(), new List<ISeriesPoint>(), portfolioTurnover, listPerformance, listBenchmark, startingCapital, riskFreeInterestRateModel, tradingDaysPerYear));
         }
 
         /// <summary>
@@ -165,7 +165,7 @@ private PortfolioStatistics GetPortfolioStatistics(bool win, int tradingDaysPerY
             var profitLoss = new SortedDictionary<DateTime, decimal>(trades.ToDictionary(x => x.ExitTime, x => x.ProfitLoss));
             var winCount = trades.Count(x => x.IsWin);
             var lossCount = trades.Count - winCount;
-            return new PortfolioStatistics(profitLoss, new List<ISeriesPoint>(),
+            return new PortfolioStatistics(profitLoss, new SortedDictionary<DateTime, decimal>(), new List<ISeriesPoint>(),
                 new SortedDictionary<DateTime, decimal>(), listPerformance, listBenchmark, 100000,
                 new InterestRateProvider(), tradingDaysPerYear, winCount, lossCount);
         }