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inconsistent Sharpe ratio calculations

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    inconsistent Sharpe ratio calculations

    I have run numerous back tests, and optimizations. What I have found is that while recording the results I have noticed that sometimes the Sharpe ratio is not calculated and returns a value of just 1.

    Why the Sharpe ratio being calculated sometimes and not others?

    Is there some criteria required for the Sharpe ratio to be calculated?

    Is there some criteria required for the Sharpe ratio to not be calculated?

    Thanks to all for looking at this and for your insights.

    #2
    Hello Ironplates,

    Thank you for your post.

    The Sharpe Ratio is calculated as the following: (Profit per Month – risk free Rate of Return) / standard deviation of monthly profits

    Note:
    • NinjaTrader presets "risk free Rate of Return" to a value of zero
    • In the event that there is only 1 month of trade history or less, there is insufficient data to calculate the monthly standard deviation of profits in which event, the Sharpe Ratio is set to a value of 1
    • For information on Statistics Definitions please visit the following link: http://www.ninjatrader.com/support/h...efinitions.htm

    Please let me know if I may be of further assistance.
    Patrick H.NinjaTrader Customer Service

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      #3
      why then is the Sharpe ratio not calculating when I'm using three months worth of data?

      Comment


        #4
        Hello Ironplates,

        Thank you for your response.

        Are you receiving a value for the Sharpe Ratio? Generally, a ratio of 1 or greater is good, 2 or greater is very good, and 3 and up is great. Are you receiving a zero (0)?

        I look forward to assisting you further.
        Patrick H.NinjaTrader Customer Service

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          #5
          the Sharpe ratio sometimes is reporting just a 1. However, my model typically reports Sharpe ratios from 2.5 as high as 12 from the combined results as well as for each instrument, sometimes range in the 30s. Therefore, Sharpe ratios reported that 1.0 give me the impression the strategy analysis may be invalid or lacking credibility, especially when the timeframe is 90 days
          Last edited by Ironplates; 05-22-2012, 08:38 PM. Reason: typing error

          Comment


            #6
            What risk free return are you using as base for your own comparative calcs?

            You can align those better by using this method -

            http://www.ninjatrader.com/support/h...Sharpe%2BRatio
            BertrandNinjaTrader Customer Service

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