Which ratio, Sortino or Sharpe, is more suitable for assessing the risk-adjusted returns of digital assets?

5 answers

• Dec 25, 2021 · 3 years ago
  When evaluating the risk-adjusted returns of digital assets, both Sortino and Sharpe ratios are commonly used. The Sortino ratio focuses on downside risk, specifically the volatility of negative returns, while the Sharpe ratio considers both upside and downside volatility. The Sortino ratio is often preferred for digital assets because it provides a more accurate measure of risk by excluding the upside volatility. However, the Sharpe ratio is still widely used as it provides a comprehensive assessment of risk-adjusted returns. Ultimately, the choice between Sortino and Sharpe ratios depends on the specific characteristics and preferences of the investor.
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• Dec 25, 2021 · 3 years ago
  Assessing the risk-adjusted returns of digital assets requires considering the volatility and downside risk. The Sortino ratio, unlike the Sharpe ratio, only takes into account the volatility of negative returns. This makes the Sortino ratio more suitable for digital assets, as they are known for their high volatility and potential for significant downside risk. On the other hand, the Sharpe ratio considers both upside and downside volatility, providing a more balanced view of risk-adjusted returns. It is important to note that neither ratio is inherently better than the other, and the choice depends on the investor's risk tolerance and investment strategy.
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• Dec 25, 2021 · 3 years ago
  When it comes to assessing the risk-adjusted returns of digital assets, both Sortino and Sharpe ratios have their merits. The Sortino ratio focuses on downside risk, which is particularly relevant for digital assets known for their high volatility. On the other hand, the Sharpe ratio considers both upside and downside volatility, providing a more comprehensive measure of risk-adjusted returns. At BYDFi, we believe that both ratios can be valuable tools for investors in evaluating the risk associated with digital assets. It ultimately depends on the investor's preferences and risk appetite.
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• Dec 25, 2021 · 3 years ago
  The choice between Sortino and Sharpe ratios for assessing the risk-adjusted returns of digital assets depends on the investor's perspective. The Sortino ratio is more suitable for risk-averse investors who are primarily concerned with downside risk. It focuses on the volatility of negative returns, providing a more conservative measure of risk-adjusted returns. On the other hand, the Sharpe ratio considers both upside and downside volatility, making it suitable for investors who are willing to take on more risk in pursuit of higher returns. It is important for investors to understand their risk tolerance and investment goals before deciding which ratio to use.
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• Dec 25, 2021 · 3 years ago
  When evaluating the risk-adjusted returns of digital assets, it is important to consider both the Sortino and Sharpe ratios. The Sortino ratio focuses on downside risk, specifically the volatility of negative returns, which is particularly relevant for digital assets known for their high volatility. On the other hand, the Sharpe ratio considers both upside and downside volatility, providing a more comprehensive measure of risk-adjusted returns. Both ratios have their strengths and weaknesses, and the choice depends on the investor's risk appetite and investment strategy. It is recommended to analyze the risk-adjusted returns using both ratios to gain a more complete understanding of the risk associated with digital assets.
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