Metric Definitions
The page contains metric definitions used in the Dashboard. Hover over the "" icon to see the definition.
General
Risk-free Rate
The risk-free rate is the theoretical rate of return of an investment with zero risk. It represents the interest an investor would expect from an absolutely risk-free investment.
Link: Investopedia
Performance Metrics
Cumulative Return
The cumulative return on an investment is the aggregate amount that the investment has gained or lost over time, independent of the amount of time involved.
The cumulative return can be expressed as a simple return using arithmetic average or as a compounded return using geometric average. We measure the cumulative return with the compounding effect, assuming the profits are reinvested. Different from CAGR, this value is not annualized.
Formula:
where
where the End Value is expressed using compounded return.
Link: Investopedia
CAGR
The compound annual growth rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each period of the investment’s life span. Different from the cumulative compounded return, this value is expressed in annual terms.
Formula:
where
Link: Investopedia
Annual Return
The annual return averages the end-of-year returns for an investment over a series of years. The return can be expressed as a simple return using arithmetic average or as a compounded return using geometric average. We measure the return with the compounding effect, assuming the profits are reinvested.
Monthly Return
The monthly return averages the end-of-month returns for an investment over a series of months. The return can be expressed as a simple return using arithmetic average or as a compounded return using geometric average. We measure the return with the compounding effect, assuming the profits are reinvested.
Daily Return
The daily return averages the daily returns for an investment. The return can be expressed as a simple return using arithmetic average or as a compounded return using geometric average. We measure the return with the compounding effect, assuming the profits are reinvested.
Sharpe Ratio
The Sharpe ratio measures risk-adjusted performance of an investment by comparing the excess returns with the total standard deviation of the portfolio returns. The excess returns are returns above the risk-free rate of return. The Sharpe ratio above 1 is considered good.
Formula:
where
Link: Investopedia
Sortino Ratio
The Sortino ratio is a variation of the Sharpe ratio that compares the excess returns with the standard deviation of negative portfolio returns, instead of the total standard deviation of the portfolio returns.
Formula:
where
Link: Investopedia
Omega Ratio
The Omega ratio compares investment's gains relative to its losses. It is a variation of the Sharpe ratio that additionally considers the third and fourth momentum effect, i.e., skewness and kurtosis.
Formula:
where
Calmar Ratio
The Calmar ratio compares the CAGR of the portfolio with its maximum drawdown.
Formula:
where CAGR is the compound annual growth rate, and Max Drawdown is the maximum loss from a peak to a trough in the portfolio value.
Link: Investopedia
MTD
The month-to-date return represents the cumulative return of an investment from the beginning of the current month up to the present date, capturing returns for the ongoing month.
Formula:
where
3M
The three months return represents the cumulative return of an investment over the past three months, measuring the percentage change in value during this quarterly period.
Formula:
where
6M
The six months return represents the cumulative return of an investment over the past six months, measuring the percentage change in value during this semi-annual period.
Formula:
where
YTD
The year-to-date return represents the cumulative return of an investment from the beginning of the current calendar year up to the present date, capturing returns for the ongoing year.
Formula:
where
1Y
The one year return represents the cumulative return of an investment over the past twelve months, measuring the percentage change in value during this annual period.
Formula:
where
3Y (ann.)
The three years annualized return represents the compound annual growth rate (CAGR) of an investment over the past three years.
Formula:
5Y (ann.)
The five years annualized return represents the compound annual growth rate (CAGR) of an investment over the past five years.
Formula:
10Y (ann.)
The ten years annualized return represents the compound annual growth rate (CAGR) of an investment over the past ten years.
Formula:
Risk Metrics
Annualized Volatility
The annualized volatility is the standard deviation of the portfolio price on an annualized basis.
Formula:
where
Max Drawdown
The maximum drawdown (MDD) is the maximum observed loss from a peak to a trough of a portfolio, before a new peak is attained.
Formula:
where the Peak Value is the highest portfolio value, and the Trough Value is the lowest portfolio value during a drawdown period.
Link: Investopedia
Longest Drawdown
The longest drawdown, also known as the maximum drawdown duration, is the longest time it has taken for a portfolio to recover losses.
Link: Investopedia
Value at Risk
The Value at Risk (VaR) quantifies the maximum potential loss of a portfolio at a specified confidence level. This VaR value is computed using the Variance-Covariance method at 95% confidence level. Other possible methods are historical method and the Monte Carlo method.
Formula:
where
Link: Investopedia
CVaR
The Conditional Value at Risk (CVaR), also known as the expected shortfall, measures the risk for the worst-case scenario of a portfolio. CVaR is derived by taking a weighted average of the “extreme” losses in the tail of the distribution of possible returns, beyond the Value at Risk (VaR) cutoff point.
Link: Investopedia
Recovery Factor
The recovery factor measures how fast the strategy recovers from drawdowns.
Ulcer Index
The Ulcer Index (UI) measures both the depth and duration of drawdowns, providing a measure of risk that considers both the magnitude and duration of losses.
Link: Investopedia
Serenity Ratio
The Serenity ratio (SR) is a variation of the Sharpe ratio that compares the excess returns with the risk measure based on Conditional Value at Risk and the Ulcer Index, instead of the total standard deviation of the portfolio returns.
Benchmark Comparison Metrics
Alpha
Alpha represents the excess return of the portfolio beyond what would be expected based on its beta and the benchmark (market) return.
Formula:
where
Link: Investopedia
Beta
Beta compares the volatility of the portfolio with the volatility of the benchmark (market). A beta of 1 implies the portfolio moves in line with the market, while a beta greater than 1 indicates higher volatility, and a beta less than 1 indicates lower volatility compared to the market.
Formula:
where
Link: Investopedia
Information Ratio
The Information Ratio (IR) is a variation of Sharpe ratio that uses benchmark returns instead of the risk-free rate.
Formula:
where
Link: Investopedia
Treynor Ratio
The Treynor ratio compares the excess returns with the investment's beta, representing systematic risk.
Formula:
where
Link: Investopedia