Rolling Returns Explained 2025: Definition, Examples & Analysis for Investors

What Are Rolling Returns?

Rolling returns, sometimes called "rolling period returns" or "rolling time periods," represent the annualized average returns over a specific timeframe ending in the year mentioned. This method helps investors understand how returns behave over different holding periods, reflecting more realistic investment experiences.

By examining a portfolio’s rolling returns, investors gain a smoothed view of performance across multiple intervals, offering a more comprehensive and reliable insight than relying on results from just one isolated period.

Key Insights

• Rolling returns calculate annualized average returns over a period ending in a specified year.
• They help analyze return patterns similar to actual investor holding periods.
• Rolling returns smooth out performance fluctuations by considering multiple overlapping periods.
• Trailing 12 months (TTM) is a popular rolling return measurement.

Why Are Rolling Returns Important?

The primary purpose of rolling returns is to reveal how often and by how much an investment’s performance varies, highlighting both strong and weak phases. This approach delivers a more balanced understanding of a fund’s historical returns, avoiding bias from recent short-term data.

For example, a 5-year rolling return for 2015 covers January 1, 2011, through December 31, 2015, while the 2016 rolling return covers 2012 through 2016. Analysts often dissect multi-year periods into consecutive 12-month segments to better visualize performance trends.

Rolling returns allow investors to see how a fund performed at different points. For instance, a 9% annualized return over 10 years means an average yearly gain if held from the start of Year 0 to the end of Year 10. However, returns within those years might have fluctuated significantly, such as a 35% gain in Year 4 and a 17% loss in Year 8.

Analyzing rolling returns reveals these ups and downs by calculating returns for every possible 12-month window, not just calendar years. This method highlights the best and worst periods more accurately, offering deeper insights for investment decisions.

In equity research, companies report financials quarterly per GAAP standards, with less frequent monthly updates on key metrics. Rolling returns help supplement this data by providing a continuous performance perspective.

Understanding Trailing 12 Months (TTM) Rolling Returns

Trailing 12 months (TTM) is a widely used rolling return period representing the most recent 12 consecutive months of financial data. Unlike fiscal-year-end reports, TTM captures the latest performance trends.

TTM returns annualize recent data, minimizing seasonal effects and smoothing out irregular financial events like temporary demand spikes or expense changes. This makes TTM valuable for analyzing ongoing business health.

Analysts prefer TTM to evaluate current financial conditions using the freshest monthly or quarterly figures rather than relying solely on older annual reports. While less effective for short-term shifts, TTM is excellent for forecasting future performance.

Companies use TTM internally to track key performance indicators (KPIs), revenue growth, profit margins, and working capital, adapting to seasonal or volatile changes effectively.

Although publicly traded companies disclose quarterly financials per SEC regulations, TTM data often requires calculation by combining recent quarterly results. For example, General Electric’s Q1 2020 revenue was $20.5 billion compared to $27 billion in Q1 2019, with full-year 2019 sales at $95 billion. Calculating TTM revenue involves subtracting Q1 2019 from 2019 total and adding Q1 2020, resulting in $88.5 billion.

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