If you are confused by personal finance terms, jargon and calculations, heres a series to simplify and deconstruct these for ...

The Sharpe ratio is one way to capture this risk-versus-reward detail and give investors extra insight into their assets' performance. Some investors use an index fund as a benchmark and attempt ...

To see how the Sharpe ratio can be used, let's use the example of an investor holding a portfolio that has an annual return of 8%, while the risk-free rate is 2%. The portfolio’s standard ...

For a portfolio, security, asset class or fund, the Sharpe Ratio calculates returns over the ‘risk-free’ rate, compared to the underlying volatility. The risk-free rate often used is the 90 ...

The K-Ratio is often used alongside other metrics like the Sharpe ratio and Sortino ratio. While the Sharpe ratio evaluates risk-adjusted returns and the Sortino ratio highlights downside risk ...

A higher Sortino ratio can indicate a good return relative to the risk taken. The Sortino ratio focuses on downside volatility, while the Sharpe ratio considers both upside and downside volatility ...

to measure volatility instead of adjusting portfolio returns using the portfolio's standard deviation as done with the Sharpe ratio. Limitations of the Treynor Ratio A main weakness of the Treynor ...

Performance measures must align with portfolio use and features. Avoid Sharpe and similar ratios due to flaws; consider alternatives like trimmed alpha, median returns, and value at risk.

Modern Portfolio Theory leverages the Sharpe ratio to enhance portfolio construction by emphasizing asset class correlations – especially in fixed income. Using Morningstar index data ...