For academic purposes I try to estimate the profitability of a short position while not knowing the margins and cost associated with shorting, thus I am only interested in the gains or losses made from shorting a stock. I got this far and have the absolute return; however, this is obviously useless on its own when wanting to compare the profits from several short positions. Thus far I have used Sharpe ratio, but I also try to use a volatility measure to explain the Sharpe ratio, which leads to conflict in the interpretability. Does someone have an idea on how to handle this, if further information is required, I will try to be of help.

  • $\begingroup$ Why not use the profit as a percentage of the initial value of stock that you shorted. It is the simplest way. $\endgroup$ – Alex C Jan 31 '19 at 15:55

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