The Relative Attribution Analysis will help to understand the sources of performance (or underperformance) in a portfolio relative to a benchmark. By breaking down performance into different sub-categories, typically by sector, it allows investors to identify the key drivers behind the portfolio's relative success or failure, thereby enabling more informed investment decisions. 
The table displays the respective sector/category weights and returns for the portfolio and the benchmark. From this data, the analysis calculates three key scores: Allocation, Selection, and Interaction. These scores provide insights into the portfolio's performance relative to the benchmark:
Allocation: The Allocation Score assesses the impact of the portfolio manager's decisions regarding the allocation of assets to various sectors or categories compared to the benchmark.
This score helps determine whether the portfolio's performance is mainly driven by the allocation of assets to specific sectors or other classes, indicating the success or failure of allocation decisions.
Selection: The Selection Score evaluates how the individual securities within each category performed relative to their counterparts in the benchmark.
This score isolates the impact of stock or security selection within each category, allowing you to understand if the portfolio outperformed or underperformed the benchmark due to the choice of specific securities.
Interaction: The Interaction Score accounts for the combined effect of both allocation and selection decisions on the portfolio's performance. It shows how these two components interact.
This score helps you understand how the combination of asset allocation decisions and security selection decisions influenced the portfolio's relative performance. It's crucial in identifying whether the two components worked together synergistically or had conflicting impacts on performance.
The calculations for each component score are shown below:
|
Score |
Formula |
|
Allocation |
(Portfolio Weight - Benchmark Weight) x Benchmark Return |
|
Selection |
(Portfolio Return - Benchmark Return) x Benchmark Weight |
|
Interaction |
(Portfolio Weight - Benchmark Weight) x (Portfolio Return - Benchmark Return) |
|
Total |
Allocation + Selection + Interaction |