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compounding in short positions

The 'trick' with short positions is to first compound the asset's returns, and only then to apply the position weights, i.e. -1 in your case. See also this answer How to calculate holding period ...
Enrico Schumann's user avatar
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Calculating returns on sequence of trades with zero starting capital

Hi Jkut: First you should always specify the return in the sense of when you calculate the return, what are you calculating the return of ? In our case, we will calculate the return on the two share ...
mark leeds's user avatar
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