Sharpe Ratio

 

Sharpe Ratio is a measure of risk-adjusted return.  It is desirable to have a high Sharpe Ratio, as this indicates more return for a given amount of risk.  Sharpe Ratios can be calculated for any investment, symbol, asset type, investment goal, sector, investment type, currency, or sub-portfolio.

Calculation Details:

When calculating the Sharpe Ratio all the monthly Time-Weighted Returns (TWR) over the specified comparison period are calculated.  For example, if the comparison period is 5 years, there are 60 monthly returns calculated.  The Sharpe Ratio is calculated using the formula:

 

 

where r represents the monthly returns, and f represents a monthly risk-free return.  When calculating returns your current interpolation range preferences are used.  If sufficient pricing data is not available the Sharpe Ratio of investments will not be reported.

Advanced:

Fund Manager can output the data points used in this calculation to a log file.  By default the logging feature is turned off.  To turn it on, create a new registry string value at:

 

HKEY_CURRENT_USER\Software\Beiley Software\Fund Manager\CurrentVersion\techanal

 

named "benchmarklog" and set it to a value of "1".  When calculating the Sharpe Ratio for an investment the log file is named "sharpe_log.txt".  When calculating the Sharpe Ratio for a sub-portfolio the log file is named "sharpe_port_log.txt".  Each of these logs will be located in your user's AppData\Roaming\Fund Manager folder (usually a hidden folder).  These log files are deleted upon exiting Fund Manager.

See Also

Benchmark Dialog

Custom Report

Alpha

Beta

Correlation

R-Squared

Standard Deviation of Returns

Time-Weighted Return

 


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