Strategy: Every bundle of symbols, published by our BULLETIN and splitted by minute of opening and expected direction.
- 5 minute past market open, UP direction (appreciation)
- 15 minute past market open, UP direction (appreciation)
- 5 minute past market open, DOWN direction (depreciation)
- 15 minute past market open, DOWN direction (depreciation)
Achieved Value: see below “How to calculate it?” – in this table we assume RFR is 0% (see simulation for RFR = 1% below)
Sharpe Index: see below “How to calculate it?“
What is the Sharpe Ratio?
In finance, the Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) measures the performance of an investment such as a security or portfolio compared to a risk-free asset, after adjusting for its risk. It is defined as the difference between the returns of the investment and the risk-free return, divided by the standard deviation of the investment returns. It represents the additional amount of return that an investor receives per unit of increase in risk.
How to calculate it?
Since its revision by the original author, William Sharpe, in 1994, the ex-ante Sharpe ratio is defined as:
is the asset return,
is the risk-free return (such as a U.S. Treasury security).
is the expected value [in our case the ACHIEVED VALUE] of the excess of the asset return over the benchmark return, and
is the standard deviation of the asset excess return.
The ex-post Sharpe ratio uses the same equation as the one above but with realized returns of the asset and benchmark rather than expected returns; see the second example below.
The information ratio is a generalization of the Sharpe ratio that uses as benchmark some other, typically risky index rather than using risk-free returns.
What if RFR (risk-free return) is 1% per year?
(that is 0,25% per quarter)