0
What else can I help you with?
How does the risk or return ratio of a government bond compare with that of other types of investments?
The risk of a government bond is minimal, though the return from the government bond is very low compared to other lucrative bonds available in the market.When you opt for more return, there is more risk. Whereas though in government bond, the return is low, your investment is well secured and risk ratio is almost nil.
How do you compute the risk-adjusted return on an investment?
The risk-adjusted return is a measure of how much risk a fund or portfolio takes on to earn its returns, usually expressed as a number or a rating. This is often represented by the Sharpe Ratio. The more return per unit of risk, the better. The Sharpe Ratio is calculated as the difference between the mean portfolio return and the risk free rate (numerator) divided by the standard deviation of portfolio returns (denominator).
What is sharpe ratio?
The Sharpe Ratio is a financial benchmark used to judge how effectively an investment uses risk to get return. It's equal to (investment return - risk free return)/(standard deviation of investment returns). Standard deviation is used as a proxy for risk (but this inherently assumes that returns are normally distributed, which is not always the case). See the related link for an Excel spreadsheet that helps you calculate the Sharpe Ratio, and other limitations.
How do you calculate sortino ratio?
The Sortino Ratio is the actual return minus the target return, all divided by the downside risk. The downside risk is either calculated by the semi standard deviation, or the 2nd order lower partial moment. The related link "Calculate the Sortino Ratio with Excel" provideds an Excel spreadsheet to calculate the Sortino Ratio
How is the Treynor ratio Annualized?
The Treynor Ratio is (expected return - risk free rate) / beta. Beta is dimensionless and cannot be annualized - the figure is the same whether you use daily, monthly or yearly returns. The expected return and the risk free rate only need to be annualized. If they're based on daily returns, then raise them to the power (1+daily interest rate)^252 (assuming 252 trading days in one year). See the link below for an example of a spreadsheet which calculates the Treynor Ratio
What is better a high or low sortino ratio?
A higher Sortino ratio is better as it indicates a better risk-adjusted return compared to a lower ratio. It measures the performance of an investment relative to the downside risk. A higher Sortino ratio suggests that the investment has generated higher returns for the amount of downside risk taken.
How do you calculate treynor ratio in Excel?
calculate the effective return (mean return minus the risk free rate) divided by the beta. the excel spreadsheet in the related link has an example.
What is sharp ratio in portfolio management?
sharp ratio: measures the exess return on the portfolio the manager provide for the exposure to risk, the way it calculated. ER_RF/Standrd dev Yasir Alani
Sharpe Investing?
Have you heard of the Sharpe Ratio? The Sharpe Ratio is a measure of the risk-adjusted return of an asset or a portfolio of assets.The Sharpe Ratio can be used to compare investment strategies or managers, taking into account the amount of risk exposure each has in relation to their returns.William Forsyth Sharpe created the ratio in 1966. He would later develop the Capital Asset Pricing Model (CAPM) for which he would win the Nobel Prize in Economics.The Sharpe Ratio is calculated by dividing the difference between the average return for the portfolio and the risk-free rate of return by the standard deviation of returns for the portfolio.The formula looks like:S(x) = (Rx – Rf) / StdDev(x)Where x = portfolio, Rx = average returns of portfolio, Rf = risk-free rate of return, and StdDev(x) = the standard deviation of returns for x.So how do you go about using this tool? First, it’s important to remember that, just like any other number derived from a formula you use to evaluate investments, The Sharpe Ratio can act as a guide, but should not be used in a vacuum. There are always many things to consider when investing.The Sharpe ratio can give you some idea of the efficiency of a portfolio by showing the amount of return generated per unit of risk assumed.The higher the Sharpe Ratio the better relationship of reward to risk the portfolio is deemed to have.Because the Sharpe Ratio takes volatility of a portfolio into account in its analysis its use is helpful when comparing different investment strategies or managers.All other things being equal (i.e. rate of return, constant risk-free rate) the strategy or manager exhibiting the highest return with the lowest amount of risk (as measured by standard deviation) would be the better choice.
How do you calculate risk - free return?
Risk free rate of return or risk free return is calculated as the return on government securities of the same maturity.
Basic concept of risk and return?
The higher the risk, the higher the return.
Relationship between risk and return?
risk is pre-stage for return...
