---
title: "CAGR"
description: "CAGR is the compound annual growth rate — the constant yearly rate taking a strategy from its starting value to its final value over the backtest period."
canonical_url: "https://fincanva.com/docs/analysis/cagr"
last_updated: "2026-08-01"
md_url: "https://fincanva.com/docs/analysis/cagr.md"
---

# CAGR

CAGR, the compound annual growth rate, is the single constant yearly rate that would grow a strategy from its starting value to its final value over the backtest period. It expresses a whole run's return as one annualised percentage, so runs of different lengths can be compared on the same yearly scale. CAGR is the *compounded* view of annualised return — it accounts for growth building on growth, unlike [AAGR](/docs/analysis/aagr), which averages yearly returns as if each restarted from scratch. Because it is a ratio, CAGR does not depend on how much starting capital you used.

**Also seen as:** compound annual growth rate, annualised return, geometric return

## How is CAGR calculated?

CAGR takes the whole-period return and finds the constant yearly rate that, compounded over the number of years in the period, reproduces it.

$$
\text{CAGR} = (1 + \text{total return})^{1/\text{years}} - 1
$$

where: total return is the whole-period gain as a fraction, and years is the length of the backtest in calendar years.

## What does CAGR mean on my result?

The CAGR on a result is the single yearly rate that would have carried that run from its starting value to its final value — it restates the whole backtest as one annualised percentage.

It is a summary of the period, not a rate any individual year achieved: a run that gained 40% one year and lost 15% the next still reports one CAGR, and no year in it looked like that number. It also says nothing about the path — two runs with the same CAGR can have had very different [drawdowns](/docs/analysis/max-drawdown) along the way, which is why the metrics view shows both. Compare CAGRs only across runs of comparable length and over the same period; a 3-year run and a 20-year run annualise very different amounts of market history.

## Defaults in Fincanva

- Fincanva computes CAGR geometrically over the calendar years of the backtest, carried to decimal months.
- CAGR fills the annualised-return slot on the metrics view when **Reinvest profits** is on; with it off, the same slot shows [AAGR](/docs/analysis/aagr), the arithmetic version.
- It is expressed as a percentage and can be negative when a strategy loses money over the period.

## Worked example

A strategy grows 10,000 into 16,100 over 5 years — a total return of +61%. Its CAGR is the yearly rate that compounds to that gain: (1 + 0.61)^(1/5) − 1 ≈ 0.10, or about 10% per year. Growing at a steady 10% a year for five years does turn 10,000 into roughly 16,100, which is exactly what CAGR states in one number.

*A CAGR describes what a strategy would have done on historical data, not what it will do, and no CAGR is a rate you can expect to repeat. Fincanva provides no financial advice — see [Is this financial advice?](/docs/investing-theory/is-this-financial-advice).*