Tag
#risk-adjusted-returns
7 articles
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Risk Adjusted Returns Explained: Why Raw Return Is Never the Whole Answer
A risk adjusted return measures how much return was earned per unit of risk taken. It exists because two portfolios with the same return can involve completely different risk.
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Sharpe vs Sortino vs Calmar: Which Risk-Adjusted Ratio Answers Which Question?
Sharpe, Sortino and Calmar all divide return by risk, but each defines risk differently: total volatility, downside volatility, and worst peak-to-trough loss.
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Upside and Downside Capture Ratio, Explained
Upside and downside capture ratios measure how much of a benchmark's gains and losses a portfolio picked up. Read as a pair, they describe a portfolio's asymmetry.
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What Is the Calmar Ratio? Return Measured Against Maximum Drawdown
The Calmar ratio divides annualised return by the worst peak-to-trough fall over the same period. It is a pain-adjusted measure of whether the return justified the depth.
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What Is the Sharpe Ratio? Excess Return per Unit of Risk, Explained
The Sharpe ratio measures how much return a portfolio earned above the risk-free rate for each unit of total volatility it took on. Higher is generally better.
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What Is the Sortino Ratio? Return per Unit of Downside Risk
The Sortino ratio divides excess return by downside deviation instead of total volatility, so only losses count as risk. It is the fairer measure for asymmetric strategies.
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What Is the Treynor Ratio? Excess Return per Unit of Market Risk
The Treynor ratio divides excess return by beta rather than by total volatility, so it measures reward per unit of market risk alone. Useful for portfolios held inside a larger whole.
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