There are a number of risk-adjusted return metrics that help investors evaluate existing or potential investments. The metric may be more useful than a simple investment return metric that does not take investment risk into account. Most importantly, if you want to manage your risk according to your financial state, then a risk-adjusted mutual fund management company is a good option for you.
Here are some methods to calculate risk adjustment return ratio.
Sharpe Ratio
The Sharpe ratio calculates how much an investor is compensated for the risk they take on an investment. When comparing two different investments on the same benchmark, an asset with a higher Sharpe ratio will either offer a higher return for the same risk as other assets. Sharpe ratio greater than 1 is desirable.
Trainer ratio
The Treynor ratio measures returns above and beyond what could be achieved if an investment had no verifiable risk. This uses the beta factor instead of the standard deviation used in the Sharpe ratio.
Jensen's alpha
Jensen's alpha is used to represent the active return on an investment. Measure an investment's performance against a market index benchmark that represents the overall market movement. Alpha shows the performance of an investment after taking into account risk.
R-squared
R-Squared measures the percentage of fund movement based on the reference index movement. The ratio value varies between 0% and 100%. An R-Squared value of 100% means that the fund's movements are justified by the movement of the reference index.
Sortino Ratio
It's also another kind of Sharpe ratio. Divide the portfolio go back with the aid of using the "disadvantage risk". Downside risk is the volatility of portfolio returns below a certain level.
Now you can probably understand how much calculation is going behind risk-free decision. As an investment management firm, JP Investments specialize in providing investors risk-adjusted returns through in-depth research and analysis of mutual funds. Get the best financial assistance in Kolkata and secure your family future.
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