# average return Vs cumulative return interpretation

I am looking for the interpretation which distinguishes between average return and cumulative return.
I have two portfolios : the average return of portfolio 2 = 3 10E-4 per day while the average return of portfolio 4 = 4.21 10E-4 .. portfolio 4 outperforms portfolio 2.

However, when I graph the cumulative returns of the two portfolios, it's clear that portfolio 2 exceeds portfolio 4.
I would be grateful if you could help me to understand and interpret the following graphic.

1. Portfolio 1 returns -10% in month 1 and 10% in month 2. Average arithmetic return is zero, and cumulative return is $(1-10\%)(1+10\%)=0.99$.
2. Portfolio 2 returns -50% in month 2 and 50% in month 2. Average arithmetic return is still zero, but cumulative return is $(1-50\%)(1+50\%)=0.75$, a much lower terminal value!
In general, arithmetic return and geometrically compounded return are linked as follows: $$\text{annualized geometric return} \approx \text{annualized arithmetic return} - \frac{\sigma^2}{2},$$ where $\sigma$ is volatility. The more volatile a return stream is, the less cumulative compounding effect you get (all else equal).