sharpe ratio

[trend2009]

I remember few years ago I checked Barclay hedge fund database. I searched fund with sharpe above 2 or 3 with more than 3 years record. very few fund satisfied that search. is sharpe ratio above 3 is hard? Recently I found bunch of strategies with sharpe above 3. what would be considered a good sharpe on wall street? any wall street veterans here please comment, 1-2 sharpe is good? Higher sharpe often comes with less capacity. As an individual, I pursue higher sharpe. but if thinking about scaling up, it is a trade off between lower sharpe and larger capacity. what low is good enough considered by investors from wall street ?

 

[Businessman]

I think Rentec Medallion is the only known fund with large capacity ($15 Billion AUM) that has sharpe above 2.0.

There are supposed to be high frequency firms that have Sharpe ratios much higher. But i don't know the kind of size they handle.

The more good trades you can find in any time period the higher your Sharpe will be. If you have a relatively low frequency trading strategy, it is unlikely to have a high Sharpe ratio of 3 . Most likely your small sample size is small, or the strategy is curve fit.

 

[spy]

I think there are always tradeoffs. The more money you manage, the harder it becomes to find good investments and so size plays a role. This is just due to the law of large numbers.

A high sharpe for a long time is most difficult... probably why you didn't find many funds with that kind of track record. Any sharpe over 1 is pretty good. I think even a positive sharpe isn't exactly bad... you're making money but then the question is could you be safely making more by just buying your benchmark instead.

The converse, of course, is that a negative sharpe for an extended period is very bad. It's not the only metric though and so I, personally, don't like agonizing over it.

 

[Businessman]

The converse, of course, is that a negative sharpe for an extended period is very bad. It's not the only metric though and so I, personally, don't like agonizing over it.

A high sharpe ratio, like above 2.5, you can give up your day job. You wont have many losing months. This is the consistency everyone dreams of.

Low ratio, you are going to have long periods where you don't make money followed by periods where you do.

 

[spy]

A high sharpe ratio, like above 2.5, you can give up your day job. You wont have many losing months.

Low ratio, going to have long periods where you don't make money.

Either give up your day job... or it currently is your day job. Amounts to about the same, right?

 

[Nobert]

Beta or anything else of that sort, for retailer, it's, irrelevant.

 

[trend2009]

I think Rentec Medallion is the only known fund with large capacity ($15 Billion AUM) that has sharpe above 2.0.

There are supposed to be high frequency firms that have Sharpe ratios much higher. But i don't know the kind of size they handle.

The more good trades you can find in any time period the higher your Sharpe will be. If you have a relatively low frequency trading strategy, it is unlikely to have a high Sharpe ratio of 3 . Most likely your small sample size is small, or the strategy is curve fit.

I read somewhere medallion has a sharpe above 10

 

[trend2009]

A high sharpe ratio, like above 2.5, you can give up your day job. You wont have many losing months. This is the consistency everyone dreams of.

Low ratio, you are going to have long periods where you don't make money followed by periods where you do.

I have a strategy tested on the past 20 years. 15 years win and 5 years lose. The sharpe is 2.5. In term of months, 129 months win and 99 months lose. The win is often larger than lose. Is that good?

 

[spy]

Beta or anything else of that sort, for retailer, it's, irrelevant.

IMHO the distinction between retail/institutional has been trivialized over the years. These days info and tech flow very freely and now it's mostly a matter of whether you're taking fees and dealing with regulations or not. OTOH, maybe you're right and it's a chicken/egg type issue.

But, in either case it pays to have a handle on your performance analytics. If that turns you "institutional" in a loose sense of the word, so be it.

 

[Businessman]

I have a strategy tested on the past 20 years. 15 years win and 5 years lose. The sharpe is 2.5.

33% losing years, and Sharpe of 2.5, something doesn't seem right.