Sortinoratio — Indicators and Strategies

Sharpe and Sortino Ratios with Date Range This indicator calculates the Sharpe and Sortino ratios using a chart symbol's periodic price returns. I added the ability to calculate SORTINO and Sharpe based on CUSTOM DATES within the option menu. It builds on the script here: by adding this feature. A little about the Sortino Ratio. www.nasdaq.com I want equity market returns, but I don’t want equity market volatility. This is the sentiment many investors naturally feel. This sentiment often grows stronger as one approaches or is in the phase where they desire distributions from their savings to improve lifestyle. This is why there is a need for active management in the investment arena. The desire to control downside volatility, but also participate in the upside growth is a very fundamental human desire. The Sortino Ratio measures how well a particular investment meets this fundamental human desire. There is the old adage, “volatility is the price you pay for returns.” However, what if we could measure the historical performance of an investment and see if it has given above average returns compared to the downside volatility. This is a simple division problem. It will tell us if the volatility “price we are paying for returns” is good. We can then compare that to other investments to see how they compare. Let us take the return and subtract the risk-free interest rate and then simply divide that by the downside movement from the average. A basic division problem yielding a number that measures a very basic human desire: How well did this investment do compared to the downside risk it experienced. In the world of financial analysis and investment management, ratios are abundant. There are many ratios that are truly important to a particular analysis. However, the sheer abundance of ratios that are available often overwhelms the casual investor, leading them to disregard ratios altogether. I would argue for those investors that desire a way to rank an investment by its ability to satisfy this very fundamental human desire, the Sortino Ratio is the number they need to consider. Disappointing in the marketplace for research, the Sortino Ratio is not featured prominently. It is much easier to find the inflows a particular ETF has experienced than the Sortino Ratio. Inflows are important. They measure how much people are investing into an ETF. However, they are mostly only important to the fund manager, not the investor. What investors care about is the Risk-Adjusted Return. This is the Sortino Ratio.

Dynamic Risk-Adjusted Performance Ratios with Table With this indicator, you have everything you need to monitor and compare the Sharpe ratio, Sortino ratio, and Omega ratio across multiple assets—all in one place. This tool is designed to help save time and improve efficiency by letting you track up to 15 assets simultaneously in a fully customizable table. You can adjust the lookback period to fit your trading strategy and get a clearer picture of how your assets perform over time. Instead of switching between charts, this indicator puts all the critical information you need at your fingertips. Sharpe Ratio - Helps evaluate the overall efficiency of investments by comparing the average return to the total risk (measured by the standard deviation of all returns). Essentially, it tells you how much excess return you’re getting for each unit of risk you’re taking. A higher Sharpe ratio means you’re getting better risk-adjusted performance—something you’ll want to aim for in your portfolio. Sortino Ratio - Goes a step further by focusing only on downside risk—because let’s face it, no one worries about positive volatility. This ratio is calculated by dividing the average return by the standard deviation of only the negative returns. Perfect for those concerned about avoiding losses rather than chasing extreme gains. It gives you a sharper view of how well your assets are performing relative to the risks you’re trying to avoid. Omega Ratio - Offers a unique perspective by comparing the sum of positive returns to the absolute sum of negative returns. It’s a straightforward way to see if your wins outweigh your losses. A higher Omega ratio means your positive returns significantly exceed the downside, which is exactly what you want when building a strong, reliable portfolio. This indicator is perfect for traders who want to streamline their decision-making process and gain an edge. Bringing together these three critical ratios into a single user-defined table makes it easy to compare and rank assets at a glance. Whether optimizing a portfolio or looking for the best opportunities, this tool helps you stay ahead by focusing on risk-adjusted returns. The customizable lookback period lets you tailor the analysis to fit your unique trading approach, giving you insights that align with your goals. If you’re serious about making data-driven decisions and improving your trading outcomes, this indicator is a game-changer for your toolkit.

Risk Radar Pro The "Risk Radar Pro" indicator is a sophisticated tool designed to help investors and traders assess the risk and performance of their investments over a specified period. This presentation will explain each component of the indicator, how to interpret the results, and the advantages compared to traditional metrics. The "Risk Radar Pro" indicator includes several key metrics: ● Beta ● Maximum Drawdown ● Compound Annual Growth Rate (CAGR) ● Annualized Volatility ● Dynamic Sharpe Ratio ● Dynamic Sortino Ratio Each of these metrics is dynamically calculated using data from the entire selected period, providing a more adaptive and accurate measure of performance and risk. 1. Start Date ● Description: The date from which the calculations begin. ● Interpretation: This allows the user to set a specific period for analysis, ensuring that all metrics reflect the performance from this point onward. 2. Beta ● Description: Beta measures the volatility or systematic risk of the instrument relative to a reference index (e.g., SPY). ● Interpretation: A beta of 1 indicates that the instrument moves with the market. A beta greater than 1 indicates more volatility than the market, while a beta less than 1 indicates less volatility. ● Advantages: Unlike classic beta, which typically uses fixed historical intervals, this dynamic beta adjusts to market changes over the entire selected period, providing a more responsive measure. 3. Maximum Drawdown ● Description: The maximum observed loss from a peak to a trough before a new peak is achieved. ● Interpretation: This shows the largest single drop in value during the specified period. It is a critical measure of downside risk. ● Advantages: By tracking the maximum drawdown dynamically, the indicator can provide timely alerts when significant losses occur, allowing for better risk management. 4. Annualized Performance ● Description: The mean annual growth rate of the investment over the specified period. ● Interpretation: The Annualized Performance represents the smoothed annual rate at which the investment would have grown if it had grown at a steady rate. ● Advantages: This dynamic calculation reflects the actual long-term growth trend of the investment rather than relying on a fixed time frame. 5. Annualized Volatility ● Description: Measures the degree of variation in the instrument's returns over time, expressed as a percentage. ● Interpretation: Higher volatility indicates greater risk, as the investment's returns fluctuate more. ● Advantages: Annualized volatility calculated over the entire selected period provides a more accurate measure of risk, as it includes all market conditions encountered during that time. 6. Dynamic Sharpe Ratio ● Description: Measures the risk-adjusted return of an investment relative to its volatility. ● Choice of Risk-Free Rate Ticker: Users can select a ticker symbol to represent the risk-free rate in Sharpe ratio calculations. The default option is US03M, representing the 3-month US Treasury bill. ● Interpretation: A higher Sharpe ratio indicates better risk-adjusted returns. This ratio accounts for the risk-free rate to provide a comparison with risk-free investments. ● Advantages: By using returns and volatility over the entire period, the dynamic Sharpe ratio adjusts to changes in market conditions, offering a more accurate measure than traditional static calculations. 7. Dynamic Sortino Ratio ● Description: Similar to the Sharpe ratio, but focuses only on downside risk. Interpretation: A higher Sortino ratio indicates better risk-adjusted returns, focusing solely on negative returns, which are more relevant to risk-averse investors. ● Choice of Risk-Free Rate Ticker: Similarly, users can choose a ticker symbol for the risk-free rate in Sortino ratio calculations. By default, this is also set to US03M. ● Advantages: This ratio's dynamic calculation considering the downside deviation over the entire period provides a more accurate measure of risk-adjusted returns in volatile markets. Comparison with Basic Metrics ● Static vs. Dynamic Calculations: Traditional metrics often use fixed historical intervals, which may not reflect current market conditions. The dynamic calculations in "Risk Radar Pro" adjust to market changes, providing more relevant and timely information. ● Comprehensive Risk Assessment: By including metrics like maximum drawdown, Sharpe ratio, and Sortino ratio, the indicator provides a holistic view of both upside potential and downside risk. ● User Customization: Users can customize the start date, reference index, risk-free rate, and table position, tailoring the indicator to their specific needs and preferences. Conclusion The "Risk Radar Pro" indicator is a powerful tool for investors and traders looking to assess and manage risk more effectively. By providing dynamic, comprehensive metrics, it offers a significant advantage over traditional static calculations, ensuring that users have the most accurate and relevant information to make informed decisions. The "Risk Radar Pro" indicator provides analytical tools and metrics for informational purposes only. It is not intended as financial advice. Users should conduct their own research and consider their individual risk tolerance and investment objectives before making any investment decisions based on the indicator's outputs. Trading and investing involve risks, including the risk of loss. Past performance is not indicative of future results.

Quantitative Risk Navigator [kikfraben]📊 Quantitative Risk Navigator - Your Financial Performance GPS Navigate the complexities of financial markets with confidence using the Quantitative Risk Navigator. This indicator provides you with a comprehensive dashboard to assess and understand the risk and performance of your chosen asset. 📈 Key Features: Alpha and Beta Analysis: Uncover the outperformance (Alpha) and risk exposure (Beta) of your asset compared to a selected benchmark. Know where your investment stands in the market. Correlation Insights: Understand the relationship between your asset and its benchmark through a clear visualization of correlation trends over different time lengths. Risk-Return Metrics: Evaluate risk and return simultaneously with Sharpe and Sortino ratios. Make informed decisions by assessing the reward-to-risk ratio of your investment. Omega Ratio: Gain deeper insights into your asset's performance by analyzing the Omega Ratio, which highlights the distribution of positive and negative returns. Customizable Visualization: Tailor your chart to focus on specific metrics and time frames. Choose which metrics to display, allowing you to concentrate on the aspects that matter most to you. Interactive Metrics Table: A user-friendly metrics table provides a quick overview of key values, including average metrics, enabling you to grasp the financial health of your asset at a glance. Color-Coded Clarity: The indicator employs color-coded visualizations, making it easy to identify bullish and bearish trends, helping you make rapid and informed decisions. 🛠️ How to Use: Symbol Selection: Choose your base symbol and preferred data source for analysis. Risk-Free Rate: Input your risk-free rate to fine-tune calculations. Length Customization: Adjust the lengths for different metrics to align with your analysis preferences. Whether you're a seasoned trader or just stepping into the financial world, the Quantitative Risk Navigator empowers you to make strategic decisions by providing a comprehensive view of your asset's risk and return profile. Stay in control of your investments with this powerful financial GPS. 🚀 Start Navigating Your Financial Journey Today!

Rolling Risk-Adjusted Performance Ratios This simple indicator calculates and provides insights into different performance metrics of an asset - Sharpe, Sortino and Omega Ratios in particular. It allows users to customize the lookback period and select their preferred data source for evaluation of an asset. Sharpe Ratio: The Sharpe Ratio measures the risk-adjusted return of an asset by considering both the average return and the volatility or riskiness of the investment. A higher Sharpe Ratio indicates better risk-adjusted performance. It allows investors to compare different assets or portfolios and assess whether the returns adequately compensate for the associated risks. A higher Sharpe Ratio implies that the asset generates more return per unit of risk taken. Sortino Ratio: The Sortino Ratio is a variation of the Sharpe Ratio that focuses specifically on the downside risk or volatility of an asset. It takes into account only the negative deviations from the average return (downside deviation). By considering downside risk, the Sortino Ratio provides a more refined measure of risk-adjusted performance, particularly for investors who are more concerned with minimizing losses. A higher Sortino Ratio suggests that the asset has superior risk-adjusted returns when considering downside volatility. Omega Ratio: The Omega Ratio measures the probability-weighted ratio of gains to losses beyond a certain threshold or target return. It assesses the skewed nature of an asset's returns by differentiating between positive and negative returns and assigning more weight to extreme gains or losses. The Omega Ratio provides insights into the potential asymmetry of returns, highlighting the potential for significant positive or negative outliers. A higher Omega Ratio indicates a higher probability of achieving large positive returns compared to large negative returns. Utility: Performance Evaluation: Provides assessment of an asset's performance, considering both returns and risk factors. Risk Comparison: Allows for comparing the risk-adjusted returns of different assets or portfolios. Helps identify investments with better risk-reward trade-offs. Risk Management: Assists in managing risk exposure by evaluating downside risks and volatility.

Cobra's CryptoMarket Visualizer Cobra's Crypto Market Screener is designed to provide a comprehensive overview of the top 40 marketcap cryptocurrencies in a table\heatmap format. This indicator incorporates essential metrics such as Beta, Alpha, Sharpe Ratio, Sortino Ratio, Omega Ratio, Z-Score, and Average Daily Range (ADR). The table utilizes cell coloring resembling a heatmap, allowing for quick visual analysis and comparison of multiple cryptocurrencies. The indicator also includes a shortened explanation tooltip of each metric when hovering over it's respected cell. I shall elaborate on each here for anyone interested. Metric Descriptions: 1. Beta: measures the sensitivity of an asset's returns to the overall market returns. It indicates how much the asset's price is likely to move in relation to a benchmark index. A beta of 1 suggests the asset moves in line with the market, while a beta greater than 1 implies the asset is more volatile, and a beta less than 1 suggests lower volatility. 2. Alpha: is a measure of the excess return generated by an investment compared to its expected return, given its risk (as indicated by its beta). It assesses the performance of an investment after adjusting for market risk. Positive alpha indicates outperformance, while negative alpha suggests underperformance. 3. Sharpe Ratio: measures the risk-adjusted return of an investment or portfolio. It evaluates the excess return earned per unit of risk taken. A higher Sharpe ratio indicates better risk-adjusted performance, as it reflects a higher return for each unit of volatility or risk. 4. Sortino Ratio: is a risk-adjusted measure similar to the Sharpe ratio but focuses only on downside risk. It considers the excess return per unit of downside volatility. The Sortino ratio emphasizes the risk associated with below-target returns and is particularly useful for assessing investments with asymmetric risk profiles. 5. Omega Ratio: measures the ratio of the cumulative average positive returns to the cumulative average negative returns. It assesses the reward-to-risk ratio by considering both upside and downside performance. A higher Omega ratio indicates a higher reward relative to the risk taken. 6. Z-Score: is a statistical measure that represents the number of standard deviations a data point is from the mean of a dataset. In finance, the Z-score is commonly used to assess the financial health or risk of a company. It quantifies the distance of a company's financial ratios from the average and provides insight into its relative position. 7. Average Daily Range: ADR represents the average range of price movement of an asset during a trading day. It measures the average difference between the high and low prices over a specific period. Traders use ADR to gauge the potential price range within which an asset might fluctuate during a typical trading session. Utility: Comprehensive Overview: The indicator allows for monitoring up to 40 cryptocurrencies simultaneously, providing a consolidated view of essential metrics in a single table. Efficient Comparison: The heatmap-like coloring of the cells enables easy visual comparison of different cryptocurrencies, helping identify relative strengths and weaknesses. Risk Assessment: Metrics such as Beta, Alpha, Sharpe Ratio, Sortino Ratio, and Omega Ratio offer insights into the risk associated with each cryptocurrency, aiding risk assessment and portfolio management decisions. Performance Evaluation: The Alpha, Sharpe Ratio, and Sortino Ratio provide measures of a cryptocurrency's performance adjusted for risk. This helps assess investment performance over time and across different assets. Market Analysis: By considering the Z-Score and Average Daily Range (ADR), traders can evaluate the financial health and potential price volatility of cryptocurrencies, aiding in trade selection and risk management. Features: Reference period optimization, alpha and ADR in particular Source calculation Table sizing and positioning options to fit the user's screen size. Tooltips Important Notes - 1. The Sharpe, Sortino and Omega ratios cell coloring threshold might be subjective, I did the best I can to gauge the median value of each to provide more accurate coloring sentiment, it may change in the future. The median values are : Sharpe -1, Sortino - 1.5, Omega - 20. 2. Limitations - Some cryptos have a Z-Score value of NaN due to their short lifetime, I tried to overcome this issue as with the rest of the metrics as best I can. Moreover, it limits the time horizon for replay mode to somewhere around Q3 of 2021 and that's with using the split option of the top half, to remain with the older cryptos. 3. For the beginner Pine enthusiasts, I recommend scimming through the script as it serves as a prime example of using key features, to name a few : Arrays, User Defined Functions, User Defined Types, For loops, Switches and Tables. 4. Beta and Alpha's benchmark instrument is BTC, due to cryptos volatility I saw no reason to use SPY or any other asset for that matter.