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Sharpe Ratio

Sharpe Ratio is a very popular method of evaluating the risk v/s return performance of a portfolio. The formula used in Canopy is 

Currently (as of August 2018) Canopy uses a Risk Free Rate of 2.00% (which is approximately the 10yr US Treasure rate over the last 1 year).

Unless otherwise specified,

  1. Daily Returns is (Change in Value / Yesterday's Value) and not Log(P2/P1)
  2. All calculations ignore any impact of leverage and cost of financing (i.e. interest paid on loans). This means that Canopy calculates Sharpe Ratios assuming all positions are unleveraged

In case you need the calculations to be done differently please contact customer support and we will be able to help you.

Volatility

Volatility is a measure of  variation of a trading price series over time. It can be calculated on individual securities or indices or on entire strategies. Canopy uses the methodology suggested by Motley Fool (and therefore we use Standard Deviation of Daily Returns and not log of P2/P1).


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