I have 2 list of returns A = [0.00538467, 0.04701923, 0.00170811,...] B = [0.00299271, -0.0060228 , -0.07761099,...]

I take long position in A and short in B.

How to calculate the total return and the return if I want to invest in ratio of 0.7 in A and 0.3 in B.


1 Answer 1


Welcome to the forum. I assume your returns in the list are ordered by time?

You can simply add 1 to both lists (while multiplying the short position by a minus '-' sign BEFORE adding the 1) such that the returns become 'A Return' and 'B Return' columns: enter image description here

The 'Portfolio Return' is just the weighted sum 0.7 * 'A Return' + 0.3 * 'B Return'. The final cell in that column is the cumulative product and is your final answer.

PS. I am not sure why the table formatting is not working, so I used a picture instead.

Hopefully this helps!

  • 1
    $\begingroup$ Just to add a final comment, the long and short positions offset each other. So I think you should be looking towards 1.3 ratio in LONG and -0.3 ratio in SHORT, which makes more sense. I leave you to adjust the numbers and see if your answer is sound. $\endgroup$
    – KaiSqDist
    Sep 25, 2023 at 15:12

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