Portfolio Metrics

[Chuck Krug]

'Annualized Total Return'
The average amount of money earned by an investment each year over a given time period. An annualized total return provides only a snapshot of an investment's performance and does not give investors any indication of its volatility. Annualized total return merely provides a geometric average, rather than an arithmetic average.

 

[Chuck Krug]

Annualized Volatility: To present this volatility in annualized terms, we simply need to multiply our daily standard deviation by the square root of 252. This assumes there are 252 trading days in a given year. The formula for square root in Excel is =SQRT(). In our example, 1.73% times the square root of 252 is 27.4%.

300% seems high to me though

 

[globalarbtrader]

Annualized Volatility: To present this volatility in annualized terms, we simply need to multiply our daily standard deviation by the square root of 252. This assumes there are 252 trading days in a given year. The formula for square root in Excel is =SQRT(). In our example, 1.73% times the square root of 252 is 27.4%.

300% seems high to me though

It is, insanely, high. Without those two days in August however it would be 24%

For someone who is buying out of the money options, and whose strategy has massive positive skew, this measure is always going to overstate your risk.

GAT

 

[Chuck Krug]

DEFINITION OF 'SHARPE RATIO'
The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such calculations. It was developed by Nobel laureate William F. Sharpe. The Sharpe ratio is the average return earned in excess of therisk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return, the performance associated with risk-taking activities can be isolated. One intuition of this calculation is that a portfolio engaging in “zero risk” investment, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.


1.25 seems low to me

 

[Chuck Krug]

'Cumulative Return'
The aggregate amount that an investment has gained or lost over time, independent of the period of time involved. Presented as a percentage, the cumulative return is the raw mathematical return

 

[Chuck Krug]

'Drawdown'
The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted as the percentage between the peak and the trough.

 

[Chuck Krug]

One I never heard of before: Sortino Ratio
A modification of the Sharpe ratio that differentiates harmful volatility from general volatility by taking into account the standard deviation of negative asset returns, called downside deviation. The Sortino ratio subtracts the risk-free rate of return from the portfolio’s return, and then divides that by the downside deviation. A large Sortino ratio indicates there is a low probability of a large loss.

211.43 I beg to differ, in this account there is a 'smallish' probability of a high win, and larger probabilities of small losses

 

[Chuck Krug]

FundSeeder Score—This measure is a complex proprietary formula that is computed based on the time-series of daily returns. When assessing the FundSeeder score, it is important to know the following five facts: ● The core component of the score is the Probabilistic Sharpe Ratio developed by David H. Bailey and Marcos Lopez de Prado in ―The Sharpe Ratio Efficient Frontier.‖ ● The score penalizes accounts with an expected one-year-forward maximum drawdown of more than 15%. ● The score penalizes return distributions with ―heavy tails.‖ ● The score penalizes traders whose most recent performance is inconsistent with their total performance. ● All things being equal, traders with longer trading history will get better scores than those with shorter history

 

[Chuck Krug]

Daily Gain to Pain Ratio (GPR)—This ratio is equal to the sum of all daily returns divided by the absolute value of the sum of all daily losses. The GPR essentially shows the ratio of net returns to the losses incurred in getting those returns.

 

[Chuck Krug]

The MAR Ratio is the ratio of the annualized compounded return to the maximum drawdown. Both these terms have been defined above. The MAR Ratio gets its name from the Managed Accounts Report newsletter, which developed this metric