For example, if fund A and fund B both have 3-year returns of 15%, and fund A has a Sharpe ratio of 1.40 and fund B has a Sharpe ratio of 1.25, you can chooses fund A, as it has given higher risk-adjusted return. It is calculated by subtracting the risk-free return, defined as an Indian Government Bond, from the fund’s returns, and then dividing by the standard deviation of returns. Higher the value means, fund has been able to give better returns for the amount of risk taken. Sharpe ratio indicates how much risk was taken to generate the returns. So you can say that there is a higher chance that Fund A will continue giving similar returns in future also whereas Fund B returns may vary. If Fund A and Fund B has given 9% returns in last 3 years, but Fund A beta value is lower than Fund B. So if you are comparing 2 funds (lets say Fund A and Fund B) in the same category. Lower beta implies the fund gives more predictable performance compared to similar funds in the market. Beta value gives idea about how volatile fund performance has been compared to similar funds in the market. If Fund A and Fund B has given 9% returns in last 3 years, but Fund A standard deviation value is lower than Fund B. Lower value indicates more predictable performance. Standard Deviation value gives an idea about how volatile fund returns has been in the past 3 years. Ratios are only available for the funds which are 3 years old. Ratios calculated on daily returns for last 3 years (Updated as on 01st January, 1970) Unlocking opportunities in Metal and Mining
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |