Tools for Measuring Return and Risk Homework Help for the Finance Students
Investments such as Mutual Funds are worth time and money, only if the risk associated is carefully calculated. The calculations give us a precise picture of the present situation and also tell us how the investments or the market will shape up in the future. Most of the assignments include basic concepts, and hence students feel the need for tools for measuring return and risk homework help both online, as well as offline.
What are the Tools for Measuring Return &Risk
Sharpe ratio helps in finding the outcome of investment by adjusting the risks. It is measured by dividing the returns of a scheme to the standard deviation for any fixed duration. The higher the value, the higher is the amount of risk and the value of Sharpe ratio will be less.If the value of Sharpe ratio is high, then the returns would be better.
DR/UR considers the excess returns in a specific period of time, divided by maximum return for the same period. Downside Capture ratio considers the loss or the negative values, and Upside takes into account the excess or the profits.
If the value exceeds 100, then the investment is considered safe, and if the value is less than 100, then the investment is risky.
SD or Standard Deviation calculates the distribution of data from the mean value. If the Standard Deviation is high, that means it is far away from the mean, and hence the risk is extremely high.A higher SD can mean two things: either your investment will incur a huge profit or a huge loss.If an investor dissuades just by looking at the high value of SD, then the risk-taking ability diminishes.
Treynor Method is like Sharpe ratio. However, it uses Market Risk in the denominator instead of Standard Deviation or Total Risk. This is represented by Beta – β. This method is also called Reward Volatility Ratio.
Treynor ratio is better when it has a higher value just to Sharpe ratio. The better the value, the better will be the value of returns. This method is quite perplexing, and hence, most of the assignments will have multiple questions related to this method. Hence, professional help comes handy.
Often called as the Information Ratio is also known as IR, is measured by dividing returns to volatility – TE.IR is needed to calculate the performance of any given investment against the volatility, thereby giving an exact evaluation.
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