Relative Sharpe ratio

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3 thoughts on “Relative Sharpe ratio

  • While I think this can be interesting and I’ve done something similar before, I don’t think it answers the most important question. That question is if what you are getting is just lucky. You can use random portfolios to answer that question. You can learn more about this on http://www.burns-stat.com in particular the “random portfolio page” is http://www.burns-stat.com/pages/Finance/random_portfolios.html

    “between zero and one” assumes your Sharpe ratio is always positive.

    • Regarding “between zero and one” and negative values, yes, that’s an issue.

  • Arguably, the Sortino Ratio is a better way of quantifying an investment’s performance than the Sharpe ratio. That’s because the Sortino Ratio does not consider upside volatility (i.e. large swings upwards in price) as bad, but the Sharpe Ratio treads upside and downside volatility equally. Anyway, if you go to http://optimizeyourportfolio.blogspot.com/2011/05/calculating-sharpe-ratio-with-excel.html there is an Excel spreadsheet to calculate the Sharpe Ratio (and can be easily adapted to the Sortino Ratio)

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