Unknown Indicator

Risk Adjusted Performance In A Nutshell

Risk adjusted performance allows you to depict the return and the risk almost as two separate numbers. This type of data figure can be applied to securities, portfolios, and funds. If you are familiar with options, then you many know the Greeks that measure risk, and you can use those along with any other data point you may have.

Risk is an extremely important factor when choosing your next investment or building your first portfolio. Risk adjusted performance measures the risk that is associated with generating the return that is desired.

Closer Look at Risk Adjusted Performance

Risk boils down to an individual level and is hardly ever the same across the board. For example, if you are in your twenties, it may be in your best interest to take the risks and go after the larger returns. On the flip side, it may not be the best to take on risk if you’re sixty years old and retiring soon.

It is also important before you invest in a fund to measure their risks against the benchmark and what the fund is returning. For index funds, you should typically see the same across the board, but for sector specific, it may not be the same. Take the time to read through the prospectus of each fund you are looking at because it can give you insight into the objectives of the fund, which you want to ensure line up with your investment objectives.

Lastly, you want to look at the performance of the fund because that it what we all really care about in the end. Take a look at the longer time frame because people typically invest in a fund as long term investments. With all of that said, this is where you can implement the risk adjusted performance statistic.

Just like any new investing tool, be sure to test it out and test it on a demo account first to see if it fits your current investing style. This may not be for everyone, but knowing how to implement it can be beneficial for other endeavors down the road. Join an investing community so you can bounce ideas off of them and see how other people are using the same tool. Risk is important and performance is important, using risk adjust performance can help combine those into a number suitable for comparing against others.

Trending Themes

If you are a self-driven investor, you will appreciate our idea-generating investing themes. Our themes help you align your investments inspirations with your core values and are essential building blocks of your portfolios. A typical investing theme is an unweighted collection of up to 20 funds, stocks, ETFs, or cryptocurrencies that are programmatically selected from a pull of equities with common characteristics such as industry and growth potential, volatility, or market segment.
Cleaning Idea
Cleaning
Invested over 100 shares
Warren Buffett Holdings Idea
Warren Buffett Holdings
Invested few shares
Macroaxis Index Idea
Macroaxis Index
Invested over 200 shares
Banking Idea
Banking
Invested over 40 shares
Business Services Idea
Business Services
Invested few shares
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.

Other Complementary Tools

Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Money Managers
Screen money managers from public funds and ETFs managed around the world
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Portfolio Suggestion
Get suggestions outside of your existing asset allocation including your own model portfolios
Economic Indicators
Top statistical indicators that provide insights into how an economy is performing
Equity Valuation
Check real value of public entities based on technical and fundamental data
Stock Screener
Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Funds Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing