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What is the process for calculating the Sortino ratio for digital currencies?

avatarLevi EichelbergDec 25, 2021 · 3 years ago3 answers

Can you explain the step-by-step process for calculating the Sortino ratio specifically for digital currencies? I would like to understand how this ratio is calculated and how it can be used to evaluate the risk-adjusted returns of digital currencies.

What is the process for calculating the Sortino ratio for digital currencies?

3 answers

  • avatarDec 25, 2021 · 3 years ago
    To calculate the Sortino ratio for digital currencies, you first need to determine the average return and the downside deviation. The average return is the mean return of the digital currency over a specific period, while the downside deviation measures the volatility of negative returns. Once you have these two values, you can use the formula: Sortino ratio = (Average Return - Risk-Free Rate) / Downside Deviation. The Sortino ratio is a useful tool for evaluating the risk-adjusted returns of digital currencies, as it focuses on the downside volatility and provides a more accurate measure of risk compared to the standard deviation.
  • avatarDec 25, 2021 · 3 years ago
    Calculating the Sortino ratio for digital currencies involves a few steps. First, you need to determine the average return and the downside deviation. The average return is the mean return of the digital currency over a specific period, while the downside deviation measures the volatility of negative returns. Once you have these values, you can use the formula: Sortino ratio = (Average Return - Risk-Free Rate) / Downside Deviation. This ratio helps investors assess the risk-adjusted returns of digital currencies and make informed investment decisions.
  • avatarDec 25, 2021 · 3 years ago
    The process for calculating the Sortino ratio for digital currencies is quite straightforward. First, you need to calculate the average return and the downside deviation. The average return is the mean return of the digital currency over a specific period, while the downside deviation measures the volatility of negative returns. Once you have these values, you can use the formula: Sortino ratio = (Average Return - Risk-Free Rate) / Downside Deviation. This ratio provides a more accurate measure of risk-adjusted returns for digital currencies, as it focuses on the downside volatility.