# Questions tagged [sharpe-ratio]

Excess return per unit of deviation in return.

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### Skewness consideration for Sharpe Ratio

I have calculated Skewness of the full time period monthly returns for all the portfolios 50-50 Gold Sensex, 50-50 USA Sensex and Sensex and they at worst indicate moderate skew so this suggests ...
1 vote
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### I am comparing two assets Rolling 10 Year Sharpe Ratios. I want to know what percentage increase in Sharpe Ratio is meaningful?

If Asset A is having 35% higher Sharpe Ratio than Asset B is that significant? Or should I consider that only if Asset A is having 50% higher Sharpe Ratio than Asset B.
50 views

### how to calculate the Sharpe ratio based on a list of trades, with space between them?

First, there are a few things I'm not clear about, like what the 'risk free' return is.. is there even such a thing in trading? or how to handle inactive days, etc. Let's assume I have a period of 30 ...
88 views

### long short portfolio sharpe ratio

What is the proper way to caluclate sharpe ratio for the long short portfolio? When I calculate daily return with no cost, I use this formula: (return for long k.mean()+ (-1)*(return for short k.mean()...
88 views

### Why does the mean term have a higher effect than the covariance term in MV optimization? [closed]

I am trying to use the mean-variance (MV) optimization framework. When I change the mean term using future-ground-truth return (I am not supposed to do so), it has a higher effect on the MV ...
37 views

### Tangency portfolio negative maximum Sharpe ratio

Suppose I have three assets: the market, factor A and factor B. The market is in excess returns of the risk free rate. The other two factors are long-short portfolios. I have net returns for these ...
82 views

### statistically compare 2 sharpe ratios

I have a problem regarding comparing sharpe ratios of portfolios. As an example: I have constructed a portfolio from monthly data over 5 years, giving me a sharpe ratio of 0.85. I have a portfolio ...
56 views

### Calculating Sharpe Ratio with semi-standard deviation

Would it make sense to calculate the Sharpe Ratio with the semi-standard dev. So as to standardize/compare asset returns to their downside risk?
122 views

### How to annualize Sharpe Ratio if monthly returns are serially correlated? Calculation of autocorrelations

I am looking at a data set of 60 monthly returns (last 5 years) and want to calculate an annualized Sharpe Ratio. The usual way of doing this is to calculate the monthly Sharpe Ratio first, and then ...
77 views

### efficient frontiers are equal

I created 3 different efficient frontiers with 3 different risk factors(sharpe ratio, ulcer performance index and serenity ratio) and I wanted to find both MSR and GMV(and their equivalent for the ...
28 views

### How to control for Portfolio Margin Equity Retuirements when calculating risk vs. return (Sharpe) [duplicate]

What is the best way to control for varying margin requirements for 2 different equity securities when calculating Sharpe ratio (or any other risk return metric)? Suppose I have equity security A ...
44 views

### How can i get sharpe ratios for each month?

I am currently trying to calculate Sharpe Ratios of each blockchain ETF and cryptocurrencies. So far I have taken annual returns and calculated the Sharpe Ratio from that. For the standard deviation, ...
1 vote
135 views

### Is this quadratic form the Sharpe ratio?

I'm reading Merton's An Analytic Derivation of the Efficient Portfolio Frontier. In section IV, he derives the efficient frontier with a riskless asset. Let $\mathbf{w}$ be a vector of portfolio ...
184 views

### mean-variance optimization === max sharpe ratio portfolio?

Noobie here. I just wanna ask a simple question: in the context of portfolio optimization, is Mean-Variance optimization the same as the max sharpe ratio portfolio?
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### Compute Sharpe ratio and annualized Sharpe on captured bar returns or trade returns?

I am currently using a vectorized backtester where I have a strategy_returns series which is just a version of the bar-to-bar ...
1 vote
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### Confidence in Sharpe ratio given performance

Suppose I have a strategy that I believe has a Sharpe ratio of X - not the Sharpe ratio of the backtest (this can be absolutely determined), but the ratio I expect it will actually take on over the ...
1 vote
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### Sharpe ratio and uniformly distributed random portfolio

I am currently working on this paper which derives the Sharpe ratio distribution of uniformly random porfolios: https://www.researchgate.net/publication/...
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### Does the interval of a portfolio's returns affect Sharpe and Sortino? If so, what's the gold-standard interval?

I'm currently creating a backtesting script and I've got to the point of calculating risk metrics. It seems like the interval (daily, weekly, or monthly) I use for returns heavily changes the ...
90 views

### Practical implications of Andy Lo paper on Sharpe ratio using quarterly returns?

I am hoping to determine the practical implications of the Andy Lo paper criticizing the use of a scaling factor in converting periodic Sharpe ratio to annualized Sharpe ratio. I am particularly ...
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### Sharpe Ratio of a Long-Short Portfolio

I have a portfolio High and Low (according to the highest profit). From this I have formed my long short portfolio and calculated my Sharpe Ratio. How to interpret this correctly? Does a positive ...
34 views

### What should be the duration over which the Sharpe Ratio, particularly for mutual funds, is calculated and why?

Usually people use daily or monthly returns in the calculation of sharpe ratio. What is the reason for this granularity? Is this granularity dependent upon the type of asset? As in, stocks are ...
100 views

### Standardizing Sharpe Ratio or not when standardizing Features

I am currently trying to check the Feature Autocorrelation for a Trend Strategy. I am using XGBoost for that purpose. In addition I work with SHAP. In the first run I realized that without ...
442 views

### why does Cross Validation *not* solve Backtest overfitting?

In this famous paper, Bailey and De Prado discard Cross Validation as tool to check for Backtest overfitting, on the ground that it is just an holdout method: ... If we apply the holdout method ...
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### Correct way of making sharpe optimized portfolio?

I have monthly returns of about 977 securities of past 10 years. If I keep the returns as it is i.e. I do not multiply by 100 and keep the returns as 0.1, 0.2 , -0.3, 1.2 then I get different results ...
39 views

### What does negative proportion mean in sharpe optimization model?

Using the last 20 days of market return and some stocks return I made sharpe optimial portfolio and following were the stock names and investment proportion to be made. ...
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### Can I use Sharpe optimization model for short term portfolios?

I wanted to know if there are any mention of what is optimal lookback period i.e. how many days, weeks, months or years of return data I should consider for constructing sharpe optimal portfolio and ...
107 views

### How to test the difference between samples of sharpe ratios

I am testing the performance difference between 2 portfolio strategies. I use Monte Carlo simulation in R to generate $N$ simulations of portfolio returns for each strategy. I then compute the Sharpe ...
114 views

### Why not calculate Kelly using semivariance? As w Sortino

Kelly is calculated as mu / sigma^2. If we remove our highest performing returns from our calculations this actually increases our Kelly leverage, which does not make sense to me. A less profitable ...
1 vote
264 views

### Optimise the Sharpe ratio of a portfolio of uncorrelated assets

Given a portfolio of $n$ assets, mean returns vector $\mu$, covariance matrix $K$, one can calculate the portfolio weights $w^*$ that maximise the portfolio Sharpe ratio, by solving: w^*=\text{...
58 views

### Do options have diversification benefit?

Imagine the universe where we have one investable volatile asset but with an available liquid options chain for it. The question: can a portfolio consisted of this asset, and some options have any ...
1 vote
209 views

### How to compute a portfolio PnL and Sharpe?

I understand this is quite the common question but I haven't been able to understand this concept through the previous posts. My situation is that each day, I'm interested in buying/selling one ...
140 views

### Sharpe ratio from second returns? HFT

I have an intraday trading strategy so I take several positions each day. I have prices for each stock, with a 10 second resolution. So the data looks like this: ...
76 views

### Optimal Portfolio Formulation

I'm currently studying Luenberg's Article "Projection Pricing" (Jrl of Optimization Theory and Applications, Vol. 109, No. 1, pp. 1–25, April 2001) and there is a claim that I can't prove. ...
1 vote
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### From annualized Sharpe Ratio to number of daily losses

I have seen a few statements that link a particular annualised Sharpe Ratio to the likely frequency of 'loss day' across a given period: e.g. "A annualised Sharpe Ratio of X, implies the ...
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### Did annual Sharpe ratio follows T distribution?

Under some special condition, Sharpe ratio can be annualized by multiply $\sqrt{252}$, Since daily Sharpe ratio ($\frac{mean(r)}{std(r)}*\sqrt{T}$) follows student T distribution with degree of ...
355 views

### Do passive ETF fund managers care about profolio metric such sharpe ratios and sortino ratio?

Do passive ETF fund managers care about portfolio metrics such as Sharpe ratio and Sortino ratio? I understand hedge fund managers care about these risk metrics for their investors. What about the ...
166 views

### Are there better performance measures for mean-reverting vs trend-following trading strategies?

The Sharpe ratio is often used as measure to assess risk-adjusted returns of trading strategies. However, there are also other measures that can be used to assess risk-adjusted returns like the ...
170 views

### Statistical distribution of Max Drawdown

Are there any good papers/ references on the statistical distribution of Max Drawdown over a specified amount of time given a specified Sharpe? Assuming returns are iid normally distributed I’ve been ...
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1 vote
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### Capital efficiency of event triggered strategy

Let's assume we have two long short equity strategies A, B with a Sharpe ratio of 2 each. ...
1 vote
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### Optimising returns weighted by Sharpe ratio in the context of Supervised Learning

In the Kaggle Jane Street market prediction competition we are put in a Supervised Learning Framework to deal with 'trade opportunities'. That is, we are given instances of previous trade ...