Portfolios Calculated with the Sharpe Ratio
Survivor Portfolios are calculated with the Sharpe ratio and take into account the risk involved in a portfolio manager’s trading patterns.
What Does the Sharpe Ratio Tell me?
The Sharpe ratio tells you whether your portfolio returns are due to smart investment decisions or a result of excess risk. This measurement is very useful because although one portfolio can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been. 1
Typically, high performing portfolio returns come with big risks. Perhaps the best reason to have Sharpe ratios is that they are often used on Wall Street to measure the performance of REAL WORLD portfolio managers!
What is a good Sharpe Ratio?
In general, any number greater than 1.00 is good because that is the Sharpe ratio for a risk-free investment in U.S. Treasury bonds. If your Sharpe ratio is not above 1.00, then you would have been better off not investing in stocks, which are inherently riskier than Government backed savings bonds.
How Can I See My Sharpe Ratio?
Your Sharpe ratio is calculated daily automatically, and is displayed in the Dashboard under your "Portfolio" tab. Please note that your Portfolio must be open at least 1 week before the Sharpe ratio can be calculated.
What Exactly is the Sharpe Ratio?
It is a ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted performance. It is calculated by subtracting the risk-free rate - such as that of the 10-year U.S. Treasury bond - from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns.
More Info
How to Calculate the Sharpe Ratio
Wikipedia – The Sharpe Ratio
Investopedia – Sharpe Ratio
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Investopedia