# Scenario Analysis Evaluate impact of historic and market-driven events on portfolios or investments. {.sub-title___devsite} ## Overview The Morningstar Risk Model helps you identify, assess, and forecast the amount of risk in your investments. With dozens of distinct risk factors in scope across our global and regional equity models and global multi-asset model, users can quickly see how a variety of market conditions could affect an investment or portfolio. The Morningstar Risk Model offers a full complement of scenario analysis capabilities including historical and and market-driven scenarios allowing you to find out how your investment's forecasted cumulative return would react if significant market events occurred again today, like the 2007-2009 Global Financial Crisis or the 2020 COVID Panic and subsequent growth rally. The Scenario Analysis API is used to answer the question, “What would happen to a fund or portfolio if markets were impacted by some well-known predefined historical event?” To answer this question, the historical returns are analysed as if the event were happening today. The API also generates performance metrics for the entire time period of the predefined scenario of selected funds and/or portfolios. The API supports analysis of two types of scenarios: **Historical Events** This tool allows users to simulate historical events and examine the impact of those events on their current portfolio. **Market Shocks** This tool allows users to select a market index to determine the impact of user-specified market shocks on factor exposures, portfolio returns, value at risk, and conditional value at risk. See [Methodologies](#methodologies) for more information. ## Key Features & Capabilities - **Support for Portfolios and Individual Investments** The API supports both portfolios and individual investments. Up to 2 portfolios or 150 investments can be evaluated in a single request. The API accepts a mix of portfolio and investment identifiers. - **Returns Calculation** Calculates returns for the specified portfolios and investments based on the conditions defined for one or more scenarios. . - **Performance Metrics** Generates performance metrics for the specified portfolios and investments based on the conditions defined for one or more scenarios. Available metrics include Alpha, Return, Max Drawdown, Standard Deviation, Tracking Error. Supported metrics depend on the scenario selected. ## Use Cases - **Stress Testing Portfolios** Assess how portfolios would have performed during historical market shocks (e.g., 2008 financial crisis, COVID-19 crash) to gauge resilience. - **Evaluating Strategy Robustness** Test investment strategies under varying market conditions, such as rising interest rates, commodity price spikes, or sector downturns. - **Client Reporting and Communication** Provide clients with visual, scenario-based performance projections to illustrate potential risks and returns. - **Comparing Portfolio Alternatives** Use the same scenarios to compare the relative risk/return impact of different portfolio allocations or investment strategies. - **Forward-Looking Planning** Model potential market environments (e.g., inflation surge, tech sector boom) to prepare allocation shifts in advance. - **Hedging Strategy Validation** Test whether hedges or diversification measures remain effective under extreme but plausible market scenarios. ## Methodologies - [Morningstar Market-Driven Scenario Analysis Methodology](/content/hidden-from-navigation/morningstar-marketdriven-scenario-analysis.pdf) - [Morningstar Historical Scenario Analysis Methodology](/content/hidden-from-navigation/morningstar-historical-scenario-analysis.pdf) ## Related Information - [API Reference](/direct-web-services/documentation/direct-web-services/scenario-analysis/api-reference) - [OpenAPI Specification](/direct-web-services/documentation/direct-web-services/scenario-analysis/openapi-specification)