Hello,
I've been paper trading for a short while now and I'm wanting to analyse my trades.
I have them all stored in a spreadsheet and I'm currently mapping the Equity Curve, ROCE, Average Profit/Loss etc
I've been looking at the Sharpe Ratio and I've tried to add it to my spreadsheet but I'm having a few problems, can anyone help?
My understanding of the Sharpe Ratio is as follows...
S = (r - R) / SD
Where
S = Sharpe Ratio
r = Annual Equity Return (%)
R = Risk Free Return (say 5%)
SD = Standard Deviation of Return
So assuming I have figures as follows (entirely made up)
Date Equity Weekly Return
01/12/2004 £10,000 0
08/12/2004 £10,025 0.25%
15/12/2004 £10,089 0.64%
22/12/2004 £9,956 -1.32%
29/12/2004 £10,128 1.73%
05/12/2004 £10,125 -0.03%
12/01/2005 £10,184 0.58%
19/01/2005 £10,194 0.10%
26/01/2005 £10,275 0.79%
02/02/2005 £10,389 1.11%
09/02/2005 £10,451 0.60%
16/02/2005 £10,486 0.33%
23/02/2005 £10,515 0.29%
02/03/2005 £10,642 1.20%
I have an Equity Return of £642 over 13 weeks (i.e. 10,642 - 10,000).
This means a Weekly Equity Return of £49.38 (i.e. 642/13) or 0.49%
Multiply this by 52 weeks in the year and I get 25.68% Annual Equity return.
The Standard Deviation of my Weekly Return %'ages is 0.007 (i.e. STDEVP(0.25, 0.64, -1.32 ... 1.20)).
0.007 * SQRT(52) = 0.0505 Annual Standard Deviation.
Therefore my Sharpe Ratio is...
(25.68 - 5) / 0.0505 = 4.0977
Is this right?
I've been paper trading for a short while now and I'm wanting to analyse my trades.
I have them all stored in a spreadsheet and I'm currently mapping the Equity Curve, ROCE, Average Profit/Loss etc
I've been looking at the Sharpe Ratio and I've tried to add it to my spreadsheet but I'm having a few problems, can anyone help?
My understanding of the Sharpe Ratio is as follows...
S = (r - R) / SD
Where
S = Sharpe Ratio
r = Annual Equity Return (%)
R = Risk Free Return (say 5%)
SD = Standard Deviation of Return
So assuming I have figures as follows (entirely made up)
Date Equity Weekly Return
01/12/2004 £10,000 0
08/12/2004 £10,025 0.25%
15/12/2004 £10,089 0.64%
22/12/2004 £9,956 -1.32%
29/12/2004 £10,128 1.73%
05/12/2004 £10,125 -0.03%
12/01/2005 £10,184 0.58%
19/01/2005 £10,194 0.10%
26/01/2005 £10,275 0.79%
02/02/2005 £10,389 1.11%
09/02/2005 £10,451 0.60%
16/02/2005 £10,486 0.33%
23/02/2005 £10,515 0.29%
02/03/2005 £10,642 1.20%
I have an Equity Return of £642 over 13 weeks (i.e. 10,642 - 10,000).
This means a Weekly Equity Return of £49.38 (i.e. 642/13) or 0.49%
Multiply this by 52 weeks in the year and I get 25.68% Annual Equity return.
The Standard Deviation of my Weekly Return %'ages is 0.007 (i.e. STDEVP(0.25, 0.64, -1.32 ... 1.20)).
0.007 * SQRT(52) = 0.0505 Annual Standard Deviation.
Therefore my Sharpe Ratio is...
(25.68 - 5) / 0.0505 = 4.0977
Is this right?