Portfolio Risk & Return

Risk-Adjusted Return

Return judged against the risk taken to earn it. Two portfolios that each returned 10% are not equally impressive if one swung twice as hard or fell twice as far along the way. Risk-adjusted measures put return over some measure of risk: the Sharpe ratio uses total volatility, the Sortino ratio only the downside swings, the Treynor ratio market risk (beta), and the Calmar ratio the maximum drawdown. Each answers a slightly different question, which is why a portfolio analysis shows several. Higher is better for all of them, and all of them look backward.

Educational information, not investment advice. See it applied across the screener →