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How To Compare Similar Portfolios?

How To Compare Similar Portfolios?. daily_rets[i ] = (value[i]/value[i-1]) – 1 std_metric = stdev(daily_rets ). Sharpe Ratio . Most “important” measure of asset performance. How well does the return of an asset compensate the investor for the risk taken?

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How To Compare Similar Portfolios?

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  1. How To Compare Similar Portfolios? • daily_rets[i] = (value[i]/value[i-1]) – 1 • std_metric = stdev(daily_rets)

  2. Sharpe Ratio • Most “important” measure of asset performance. • How well does the return of an asset compensate the investor for the risk taken? • The higher the Sharpe ratio the better. • When comparing two assets each with the same return, higher Sharpe ratio gives more return for the same risk.

  3. Sharpe Ratio • Reward/Risk = How much reward are you getting for your risk? • metric = k * mean(daily_rets)/stdev(daily_rets)) • k = sqrt(250) for daily returns

  4. Example

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