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Principal Component Analysis
Principal Component Analysis Overview
Use principal component analysis to analyze asset returns in order to identify the underlying statistical factors.
The statistical factors are the independent sources of risk that drive the portfolio variance, and the returns of each corresponding
principal portfolio will have zero correlation to one another.
You can perform the principal component analysis on either the correlation matrix or the covariance matrix based on the daily or monthly returns.
Model Configuration
Principal Component Analysis Results
Note: The time period was constrained by the available data for SPDR Gold Shares (GLD) [11/18/2004 - 10/12/2026] and iShares 20+ Year Treasury Bond ETF (TLT) [07/26/2002 - 10/09/2026].
Principal Component Portfolios
Principal Component Portfolios
Name
Ticker
PC1
PC2
PC3
PC4
PC5
PC6
State Street SPDR S&P 500 ETF
SPY
50.12%
-2.69%
14.92%
10.46%
-50.85%
67.55%
iShares S&P Small-Cap 600 Value ETF
IJS
46.93%
-5.03%
18.59%
73.38%
40.53%
-19.98%
iShares MSCI EAFE ETF
EFA
50.04%
8.16%
5.19%
-26.18%
-45.52%
-68.16%
iShares MSCI Emerging Markets ETF
EEM
48.11%
11.06%
2.97%
-59.15%
60.78%
19.00%
iShares 20+ Year Treasury Bond ETF
TLT
-20.07%
59.84%
77.52%
-2.25%
-0.92%
-0.19%
SPDR Gold Shares
GLD
8.02%
78.72%
-58.19%
17.78%
-2.27%
5.57%
Principal component analysis for time period 11/18/2004 - 10/09/2026 based on the correlation matrix of daily returns
Explained Variance
Explained Variance
Principal Component
Explained Variance
Cumulative Variance
1
59.65%
59.65%
2
19.35%
79.00%
3
12.20%
91.20%
4
4.86%
96.06%
5
2.31%
98.37%
6
1.63%
100.00%
IMPORTANT: The projections or other information generated by Portfolio Visualizer regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.
The results do not constitute investment advice or recommendation, are provided solely for informational purposes, and are not an offer to buy or sell any securities. All use is subject to terms of service.
Investing involves risk, including possible loss of principal. Past performance is not a guarantee of future results.
Asset allocation and diversification strategies do not guarantee a profit or protect against a loss.
Hypothetical returns do not reflect trading costs, transaction fees, commissions, or actual taxes due on investment returns.
The results are based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete. Other investments not considered may have characteristics similar or superior to those being analyzed.