The Sharpe ratio is an investment measurement that is used to calculate the average return beyond the risk free rate of volatility per unit.
The Sortino ratio is a variation of theSharpe ratiothat differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative portfolio returns—downside deviation—instead of the total standard deviation of portfolio returns. The Sortino ratio takes an asset...
This equation is similar to the Sharpe ratio’s method of assessing risk and volatility in the market with one main exception. The Treynor method uses the investment portfolio’s beta as the measurement of risk. By comparing the beta of the investment to the volatility in the entire stock mar...
Information ratio measures success of an active investment management strategy/fund by comparing the excess returns earned by the investment portfolio to the volatility of those excess returns.
Expense ratio is the percentage of a mutual fund’s assets that are used to cover the fund’s operating costs. A lower expense ratio is generally considered favorable for investors as it can maximize their returns. Now, let’s delve deeper into understanding expense ratio and its components: ...
Sortino ratio measures excess return per unit of downside risk. It is calculated by dividing the difference between portfolio return and risk-free rate by the standard deviation of negative returns. A higher Sortino ratio is better.
The information ratio and theSharpe ratioare similar. Both ratios determine the risk-adjusted returns of a security or portfolio. However, the information ratio measures the risk-adjusted returns relative to a certain benchmark while the Sharpe ratio compares the risk-adjusted returns to the risk-...
Like theSharpe ratio—which usesstandard deviationrather than beta as the risk measure—the fundamental premise behind the Treynor Index is that investment performance has to be adjusted for risk in order to convey an accurate picture of performance. The Traynor Index was developed byeconomistJack Tr...
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