Differential Sortino Ratio
What is a good Sortino ratio?
A Sortino ratio between 0 and 1.0 is considered sub-optimal. A Sortino ratio greater than 1.0 is considered acceptable. A Sortino ratio higher than 2.0 is considered very good. A Sortino ratio of 3.0 or higher is considered excellent.
Which is better Sharpe or Sortino ratio?
Key Takeaways:
The Sortino ratio is a variation of the Sharpe ratio that only factors in downside risk. The Sharpe ratio is used more to evaluate low-volatility investment portfolios, and the Sortino variation is used more to evaluate high-volatility portfolios.
What is the formula for Sortino ratio?
Difference between Sortino Ratio and Sharpe Ratio
| Parameters | Sortino ratio |
|---|---|
| Calculation | Sortino ratio calculation is done by subtracting the investment portfolio’s total earnings from the risk-free rate of return and is then divided by the standard deviation of negative earnings. |
| Formula | Sortino ratio = (R) – Rf /SD |
What is Sortino ratio with example?
The Sortino ratio is a statistical tool which is used in order to evaluate the return from the investment for the given level of the bad risk and it is calculated by subtracting the risk-free rate of return from the expected return of the portfolio and dividing the resultant from the standard deviation of the negative …
What is downside capture?
Downside capture ratios are calculated by taking the fund’s monthly return during the periods of negative benchmark performance and dividing it by the benchmark return.
What is upside capture?
The upside capture ratio is used to analyze the performance of a fund manager during bullish runs i.e. when the benchmark had risen. Well, an upside ratio of over 100 means that a given fund has beaten the benchmark during the period of positive returns.
What is a good Jensen’s alpha?
Jensen’s measure is one of the ways to determine if a portfolio is earning the proper return for its level of risk. If the value is positive, then the portfolio is earning excess returns. In other words, a positive value for Jensen’s alpha means a fund manager has „beat the market“ with their stock-picking skills.
How is downside deviation to Sortino ratio calculated?
The volatility of a portfolio’s returns is measured taking the standard deviation of the returns over a certain period. The Sortino ratio is calculated by taking the difference between portfolio return and the risk-free rate and dividing this by the standard deviation of the negative returns.
What is downside deviation?
Downside deviation is a measure of downside risk that focuses on returns that fall below a minimum threshold or minimum acceptable return (MAR). It is used in the calculation of the Sortino ratio, a measure of risk-adjusted return.
What is maximum drawdown fund?
A maximum drawdown (MDD) is the maximum observed loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum drawdown is an indicator of downside risk over a specified time period.
What is the alpha formula?
Alpha is used to determine by how much the realized return of the portfolio varies from the required return, as determined by CAPM. The formula for alpha is expressed as follows: α = Rp – [Rf + (Rm – Rf) β]
What is a good alpha?
A positive alpha of 1.0 means the fund or stock has outperformed its benchmark index by 1 percent. A similar negative alpha of 1.0 would indicate an underperformance of 1 percent. A beta of less than 1 means that the security will be less volatile than the market.
What is alpha and beta?
Both alpha and beta are historical measures of past performances. Alpha shows how well (or badly) a stock has performed in comparison to a benchmark index. Beta indicates how volatile a stock’s price has been in comparison to the market as a whole. A high alpha is always good.
What is a good beta?
Key Takeaways. Beta is a concept that measures the expected move in a stock relative to movements in the overall market. A beta greater than 1.0 suggests that the stock is more volatile than the broader market, and a beta less than 1.0 indicates a stock with lower volatility.
Is a beta of 1 GOOD?
A beta of 1 indicates that the security’s price tends to move with the market. A beta greater than 1 indicates that the security’s price tends to be more volatile than the market. A beta of less than 1 means it tends to be less volatile than the market.
What is a high beta value?
A beta that is greater than 1.0 indicates that the security’s price is theoretically more volatile than the market. For example, if a stock’s beta is 1.2, it is assumed to be 20% more volatile than the market. Technology stocks and small cap stocks tend to have higher betas than the market benchmark.
Does gold have a negative beta?
A standard example that is offered for a negative beta investment is gold, which acts as a hedge against higher inflation (which devastates financial investments such as stocks and bonds). It is also true that puts on stocks and selling forward contracts against indices will have negative betas.
What is gold’s beta?
Abstract: Gold shows the characteristics of a zero-beta asset. It has approximately the same mean return as a Treasury Bill and bears no market risk.
What does a beta of 0.6 mean?
Teva Pharmaceutical Industry’s 2.49 beta, for example, indicates that the stock is expected to be more than twice as volatile than the market, while Intel’s beta of 0.6 means the stock will typically move at a rate that’s only about half that the broader market (data from Yahoo Finance, June 13, 2019).
What is an alpha investment?
Alpha (α) is a term used in investing to describe an investment strategy’s ability to beat the market, or its „edge.“ Alpha is thus also often referred to as “excess return” or “abnormal rate of return,” which refers to the idea that markets are efficient, and so there is no way to systematically earn returns that …
What is the difference between alpha and beta in investing?
Beta is a measure of volatility relative to a benchmark, such as the S&P 500. Alpha is the excess return on an investment after adjusting for market-related volatility and random fluctuations. Alpha and beta are both measures used to compare and predict returns.
What is the difference between alpha and beta personalities?
1. Alpha males are guys with great confidence while beta males are guys with low self-esteem. 2. Alpha males are leader types while beta males are follower types.
What are alpha and beta males?
The main difference between the alpha male and beta male is that the alpha male is used for describing a man who is seen as assertive, dominant, or powerful. On the other hand, the beta male describes the most subservient, passive, efficient, and weak man in a specific group.
What is a Gamma male?
According to Vox Day’s Socio Sexual Hierarchy, gamma males are intellectual, highly romantic, ideologically driven men who hold a lower-status position in the social dominance hierarchy—though they desire to be leaders and are envious of the rank and privilege that comes natural to the alphas and betas.
What is a Sigma male?
Sigma male is a slang term used in masculinist subcultures for a popular, successful, but highly independent and self-reliant man. Another term for a sigma male is a lone wolf.