|
PureBytes Links
Trading Reference Links
|
I might be missing something here, but how can one
calculate the sharpe ratio from the equity curve
without knowing the correlations of the underlyings?
Best Regards,
Trey
--- Mark Johnson <janitor@xxxxxxxxxxxx> wrote:
> I happen to like the Sharpe ratio too. I find that
> when I
> run a bunch of historical backtest simulations and
> measure
> lots of statistics on the resulting equity curves,
> the curves
> my eyeball and my gut like best, seem to correlate
> with
> the highest Sharpe ratio. I've tried the standard
> set of
> candidates: Kestner K-Ratio, Sortino Ratio, Schwager
> Return
> Retracement Ratio, Seykota Lake Ratio, Spratling
> R-Squared,
> Curtis Faith R-Cubed, MAR ratio, Peter Martin Ulcer
> Index,
> Wealth Lab WL Score, ad nauseum. But the equity
> curves
> I like, and the equity curves Sharpe Ratio likes
> (biggest
> ratio), are a better match than with any other
> metric.
>
> However I would like to remind folks that to
> calculate a
> Sharpe Ratio, you need a time series of returns. A
> list
> of trade outcomes is insufficient; you don't know
> the
> *timing* of those outcomes. Different trades have
> different
> durations, and because we trade *portfolios* of
> instruments,
> many trades overlap one another. For example, here
> are
> the positions in one of my personal accounts, as of
> Friday.
> (I'll be adding another one on Sunday night, as I
> just got
> an entry signal for LIFFE White Sugar #5). There
> are 29
> different positions, nine of which got entered on a
> split
> fill and/or pyramid. See Bean Oil and Corn for two
> examples.
>
> These 29 trades, soon to be 30 trades, proceed in
> parallel.
> The daily returns of these positions add together to
> form
> the daily return of the portfolio as a whole. We
> can't
> know the portfolio return (thus we can't calculate a
> Sharpe
> Ratio) without knowing the *timing* of the
> individual trades.
> In fact, the easiest and in my opinion best way to
> calculate the Sharpe Ratio, is to begin with the
> equity
> curve itself.
>
> But you knew that already. This is merely a
> reminder.
> - MJ
>
> Sym EntryDate L/S ncars Month EntryPrice
> AD 20071210 L xxx Mar 0.87265
> BO 20071224 L xxx Mar 47.68
> BO 20071224 L xxx Mar 47.66
> C 20071126 L xxx Mar 409.00
> C 20071226 L xxx Mar 452.5
> CC 20071109 L xxx Mar 1951.0
> CD 20071210 L xxx Mar 0.99645
> CD 20071210 L xxx Mar 0.9964
> CGB 20071123 L xxx Mar 115.21
> CGB 20071204 L xxx Mar 116.03
> CU 20071210 L xxx Mar 1.4669
> DA 20071126 L xxx Mar 16.92
> DA 20071126 L xxx Mar 16.90
> DX 20071206 S xxx Mar 76.50
> EBM 20071126 L xxx Mar 109.50
> ED 20071107 L xxx Jun 95.79
> ED 20071126 L xxx Jun 96.16
> FC 20071210 S xxx Jan 105.85
> FF 20071001 L xxx Mar 95.73
> FF 20071001 L xxx Mar 95.725
> FSS 20071022 L xxx Jun 94.40
> FV 20071123 L xxx Mar 109^23.5
> GC 20071123 L xxx Feb 820.5
> KW 20071123 L xxx Mar 845.5
> LC 20071207 S xxx Feb 96.175
> LCC 20071228 L xxx Mar 1056.0
> LH 20071128 S xxx Feb 62.15
> MP 20071210 L xxx Mar 0.091775
> O 20071220 L xxx Mar 302.0
> PL 20071221 L xxx Apr 1527.8
> S 20071224 L xxx Mar 1193.50
> SB 20071228 L xxx Mar 11.06
> SJB 20071205 L xxx Mar 137.28
> SJB 20071205 L xxx Mar 137.26
> SM 20071224 L xxx Mar 335.00
> SM 20071224 L xxx Mar 335.25
> TU 20071123 L xxx Mar 105^03.5
> TY 20071123 L xxx Mar 112^23.75
> ------------------------------------------------
>
>
>
|