Daily Portfolio Values

Key Portfolio Stats

• Cumulative Returns: How much the value of portfolio has gone from beginning to end. (First row vs last row of Daily Portfolio Values)
• Average daily return: Average of the daily returns
• STD daily return / Risk: STD of the daily returns
• Sharpe Ratio: Risk adjusted return

Sharpe Ratio

Risk adjusted return. Considers rewards in the light of risk.

• Lower risk is better
• Higher return is better

$S = \frac{E(R_p - R_f)}{Std(R_p - R_f)} = \frac{mean(dailyReturns - dailyRiskFreeReturns)}{Std(dailyReturns - dailyRiskFreeReturns)}$

Where, E is expected (can be replaced with mean), Rp is Daily portfolio returns and Rf is Daily risk free returns Rf in the denominator is normally zero since that is usually fixed.

Risk Free Returns

Risk free returns usually comes from

• just inserting 0%
• Treasury bills or fixed deposit, etc

You have to convert the six month/yearly return to daily return in cases of fixed deposit.

A simple trick to convert, say a yearly fixed deposit return percent, to a daily return value

$\sqrt[252]{(1 + \text{Yearly risk free return percent})} - 1$

Adjustment

• SR is an annual measure
• SR can vary widely depending on how frequently you sample
• SR annualized = K * SR
• K = square root of number of samples per year i.e. 252 for daily, 52 for weekly

BPS - Basis points

1 bps = 0.0001 10 bps = 0.001 10000 bps = 1