Quant Investing

@SwapnilK89

Hi Swapnil,

Sharpe ratio is a risk adjusted return measure. Basically you try to ascertain how much additional return you are getting above the risk free rate for the risk being taken. Where risk is calculated based om the standard deviation.

I have two issues with this ratio:

  1. It considers both upside and downside performance as the same.
  2. It considers standard deviation is risk

You can look at Sortino ratio which is better than Sharpe ration because it takes care of my objection number 1 as it only considers downside change for the standard deviation calculation.

Personally, I give more emphasis to CAGR returns, max return, max drawdown and standard deviation of returns.

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