DCA Dalio Asset ValuationDCA Dalio Asset Valuation: Total Return & Risk-Adjusted Insights
This indicator is designed to provide a comprehensive view of an asset's valuation inspired by Ray Dalio's investment principles, focusing on total returns (price appreciation plus reinvested yields) and risk-adjusted metrics. It aims to help users evaluate assets systematically by incorporating historical performance, expected returns, and volatility considerations, aligning with concepts like embracing reality, systematic decision-making, and risk parity from Dalio's framework.
Key Features:
- Historical Total Return Index: Calculates and optionally plots a normalized index (starting at 100) for total returns (including dividend reinvestment) versus pure price appreciation, highlighting the impact of yields over time.
- Risk-Adjusted Insights: Computes annualized volatility, average returns, and Sharpe ratio for the total return index, with a plot of the Sharpe ratio in a separate pane for easy analysis.
- Expected Return Prox: Estimates nominal and real expected returns using current dividend yield plus EPS growth, adjusted for user-input inflation, to proxy future appreciation and yield.
- Table: Displays key metrics in a compact table on the chart, including real/nominal expected returns, Sharpe ratio, volatility, average returns, yield contribution, and a current signal (Buy/Hold/Sell) based on customizable thresholds.
- Visual Cues: Background coloring for quick sentiment (green for buy conditions, red for sell), with alerts for signal crossovers.
- Customization: User inputs for lookback period, risk-free rate, thresholds, inflation, and toggling historical plots to maintain chart readability.
How It Works:
The script uses TradingView's built-in data functions for dividends and financial metrics. It normalizes indices for comparison, annualizes returns and volatility assuming 252 trading days, and applies a simple real return adjustment. Signals trigger when expected returns and Sharpe meet thresholds, promoting balanced, principle-based evaluation without over-reliance on price alone.
Usage Notes:
- Apply to stocks or ETFs with dividend data for best results (e.g., AAPL, SPY).
- Toggle "Show Historical Index Plots" if you want to visualize long-term trends; otherwise, focus on the table and Sharpe pane.
- Adjust inputs like thresholds or risk-free rate to fit your strategy e.g., set risk-free to current Treasury yields.
- For non-dividend assets, yield components may show NA; the script handles this gracefully.
Important Disclaimer:
This indicator is for educational and informational purposes only and does not constitute financial advice, investment recommendations, or guarantees of performance. Past performance is not indicative of future results. Users should conduct their own research and consult professionals before making trading decisions. The author assumes no liability for any losses incurred from using this script. All calculations are approximations based on available data and may vary by symbol or timeframe.
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