## Sharpe Ratio

The Sharpe Ratio of reward-to-variability ratio measures excess return per unit of risk (standard deviation) in an investment asset vehicle or investment/trading strategy. The mathematical definition of the Sharpe ratio is:     where: = portfolio return = risk-free rate = standard deviation of portfolio returns The Sharpe ratio describes how well the return of […]

## Holding period return and time-weighted rate of return

A holding period can be any period of time. The holding period of an investment can span from hours to years. The holding period return (HPR) is simply the percentage change in the value of an investment over the period that is held. The general HPR formula is the following: HPR = ((MV1 – MV0 […]

## Correlation

Correlation between two variables is defined as the covariance of the two variables divided by the product of their standard deviations. The mathematical formula is presented below: Where,  is the covariance,   is the standard deviation of asset ,   is the mean of , and  is the expectation. Properties of correlation of two random variables  and  are […]