Leonid's Bitcoin Sharpe RatioThe Sharpe ratio is an old formula used to value the risk-adjusted return of an asset. It was developed by Nobel Laureate William F. Sharpe. In this case, I have applied it to Bitcoin with an adjustable look-back date.
The Sharpe Ratio shows you the average return earned after subtracting out the risk-free rate per unit of volatility (I've defaulted this to 0.02 ).
Volatility is a measure of the price fluctuations of an asset or portfolio. Subtracting the risk-free rate from the mean return allows you to understand what the extra returns are for taking the risk.
If the indicator is flashing red, Bitcoin is temporarily overbought (expensive).
If the indicator is flashing green, Bitcoin is temporarily oversold (cheap).
The goal of this indicator is to signal out local tops & bottoms. It can be adjusted as far as the lookback time but I have found 25-26 days to be ideal.
Sharperatio
Risk Radar ProThe "Risk Radar Pro" indicator is a sophisticated tool designed to help investors and traders assess the risk and performance of their investments over a specified period. This presentation will explain each component of the indicator, how to interpret the results, and the advantages compared to traditional metrics.
The "Risk Radar Pro" indicator includes several key metrics:
● Beta
● Maximum Drawdown
● Compound Annual Growth Rate (CAGR)
● Annualized Volatility
● Dynamic Sharpe Ratio
● Dynamic Sortino Ratio
Each of these metrics is dynamically calculated using data from the entire selected period, providing a more adaptive and accurate measure of performance and risk.
1. Start Date
● Description: The date from which the calculations begin.
● Interpretation: This allows the user to set a specific period for analysis, ensuring that all metrics reflect the performance from this point onward.
2. Beta
● Description: Beta measures the volatility or systematic risk of the instrument relative to a reference index (e.g., SPY).
● Interpretation: A beta of 1 indicates that the instrument moves with the market. A beta greater than 1 indicates more volatility than the market, while a beta less than 1 indicates less volatility.
● Advantages: Unlike classic beta, which typically uses fixed historical intervals, this dynamic beta adjusts to market changes over the entire selected period, providing a more responsive measure.
3. Maximum Drawdown
● Description: The maximum observed loss from a peak to a trough before a new peak is achieved.
● Interpretation: This shows the largest single drop in value during the specified period. It is a critical measure of downside risk.
● Advantages: By tracking the maximum drawdown dynamically, the indicator can provide timely alerts when significant losses occur, allowing for better risk management.
4. Annualized Performance
● Description: The mean annual growth rate of the investment over the specified period.
● Interpretation: The Annualized Performance represents the smoothed annual rate at which the investment would have grown if it had grown at a steady rate.
● Advantages: This dynamic calculation reflects the actual long-term growth trend of the investment rather than relying on a fixed time frame.
5. Annualized Volatility
● Description: Measures the degree of variation in the instrument's returns over time, expressed as a percentage.
● Interpretation: Higher volatility indicates greater risk, as the investment's returns fluctuate more.
● Advantages: Annualized volatility calculated over the entire selected period provides a more accurate measure of risk, as it includes all market conditions encountered during that time.
6. Dynamic Sharpe Ratio
● Description: Measures the risk-adjusted return of an investment relative to its volatility.
● Choice of Risk-Free Rate Ticker: Users can select a ticker symbol to represent the risk-free rate in Sharpe ratio calculations. The default option is US03M, representing the 3-month US Treasury bill.
● Interpretation: A higher Sharpe ratio indicates better risk-adjusted returns. This ratio accounts for the risk-free rate to provide a comparison with risk-free investments.
● Advantages: By using returns and volatility over the entire period, the dynamic Sharpe ratio adjusts to changes in market conditions, offering a more accurate measure than traditional static calculations.
7. Dynamic Sortino Ratio
● Description: Similar to the Sharpe ratio, but focuses only on downside risk.
Interpretation: A higher Sortino ratio indicates better risk-adjusted returns, focusing solely on negative returns, which are more relevant to risk-averse investors.
● Choice of Risk-Free Rate Ticker: Similarly, users can choose a ticker symbol for the risk-free rate in Sortino ratio calculations. By default, this is also set to US03M.
● Advantages: This ratio's dynamic calculation considering the downside deviation over the entire period provides a more accurate measure of risk-adjusted returns in volatile markets.
Comparison with Basic Metrics
● Static vs. Dynamic Calculations: Traditional metrics often use fixed historical intervals, which may not reflect current market conditions. The dynamic calculations in "Risk Radar Pro" adjust to market changes, providing more relevant and timely information.
● Comprehensive Risk Assessment: By including metrics like maximum drawdown, Sharpe ratio, and Sortino ratio, the indicator provides a holistic view of both upside potential and downside risk.
● User Customization: Users can customize the start date, reference index, risk-free rate, and table position, tailoring the indicator to their specific needs and preferences.
Conclusion
The "Risk Radar Pro" indicator is a powerful tool for investors and traders looking to assess and manage risk more effectively. By providing dynamic, comprehensive metrics, it offers a significant advantage over traditional static calculations, ensuring that users have the most accurate and relevant information to make informed decisions.
The "Risk Radar Pro" indicator provides analytical tools and metrics for informational purposes only. It is not intended as financial advice. Users should conduct their own research and consider their individual risk tolerance and investment objectives before making any investment decisions based on the indicator's outputs. Trading and investing involve risks, including the risk of loss. Past performance is not indicative of future results.
Quantitative Risk Navigator [kikfraben]📊 Quantitative Risk Navigator - Your Financial Performance GPS
Navigate the complexities of financial markets with confidence using the Quantitative Risk Navigator. This indicator provides you with a comprehensive dashboard to assess and understand the risk and performance of your chosen asset.
📈 Key Features:
Alpha and Beta Analysis: Uncover the outperformance (Alpha) and risk exposure (Beta) of your asset compared to a selected benchmark. Know where your investment stands in the market.
Correlation Insights: Understand the relationship between your asset and its benchmark through a clear visualization of correlation trends over different time lengths.
Risk-Return Metrics: Evaluate risk and return simultaneously with Sharpe and Sortino ratios. Make informed decisions by assessing the reward-to-risk ratio of your investment.
Omega Ratio: Gain deeper insights into your asset's performance by analyzing the Omega Ratio, which highlights the distribution of positive and negative returns.
Customizable Visualization: Tailor your chart to focus on specific metrics and time frames. Choose which metrics to display, allowing you to concentrate on the aspects that matter most to you.
Interactive Metrics Table: A user-friendly metrics table provides a quick overview of key values, including average metrics, enabling you to grasp the financial health of your asset at a glance.
Color-Coded Clarity: The indicator employs color-coded visualizations, making it easy to identify bullish and bearish trends, helping you make rapid and informed decisions.
🛠️ How to Use:
Symbol Selection: Choose your base symbol and preferred data source for analysis.
Risk-Free Rate: Input your risk-free rate to fine-tune calculations.
Length Customization: Adjust the lengths for different metrics to align with your analysis preferences.
Whether you're a seasoned trader or just stepping into the financial world, the Quantitative Risk Navigator empowers you to make strategic decisions by providing a comprehensive view of your asset's risk and return profile. Stay in control of your investments with this powerful financial GPS.
🚀 Start Navigating Your Financial Journey Today!
Rolling Risk-Adjusted Performance RatiosThis simple indicator calculates and provides insights into different performance metrics of an asset - Sharpe, Sortino and Omega Ratios in particular. It allows users to customize the lookback period and select their preferred data source for evaluation of an asset.
Sharpe Ratio:
The Sharpe Ratio measures the risk-adjusted return of an asset by considering both the average return and the volatility or riskiness of the investment. A higher Sharpe Ratio indicates better risk-adjusted performance. It allows investors to compare different assets or portfolios and assess whether the returns adequately compensate for the associated risks. A higher Sharpe Ratio implies that the asset generates more return per unit of risk taken.
Sortino Ratio:
The Sortino Ratio is a variation of the Sharpe Ratio that focuses specifically on the downside risk or volatility of an asset. It takes into account only the negative deviations from the average return (downside deviation). By considering downside risk, the Sortino Ratio provides a more refined measure of risk-adjusted performance, particularly for investors who are more concerned with minimizing losses. A higher Sortino Ratio suggests that the asset has superior risk-adjusted returns when considering downside volatility.
Omega Ratio:
The Omega Ratio measures the probability-weighted ratio of gains to losses beyond a certain threshold or target return. It assesses the skewed nature of an asset's returns by differentiating between positive and negative returns and assigning more weight to extreme gains or losses. The Omega Ratio provides insights into the potential asymmetry of returns, highlighting the potential for significant positive or negative outliers. A higher Omega Ratio indicates a higher probability of achieving large positive returns compared to large negative returns.
Utility:
Performance Evaluation: Provides assessment of an asset's performance, considering both returns and risk factors.
Risk Comparison: Allows for comparing the risk-adjusted returns of different assets or portfolios. Helps identify investments with better risk-reward trade-offs.
Risk Management: Assists in managing risk exposure by evaluating downside risks and volatility.
Cobra's CryptoMarket VisualizerCobra's Crypto Market Screener is designed to provide a comprehensive overview of the top 40 marketcap cryptocurrencies in a table\heatmap format. This indicator incorporates essential metrics such as Beta, Alpha, Sharpe Ratio, Sortino Ratio, Omega Ratio, Z-Score, and Average Daily Range (ADR). The table utilizes cell coloring resembling a heatmap, allowing for quick visual analysis and comparison of multiple cryptocurrencies.
The indicator also includes a shortened explanation tooltip of each metric when hovering over it's respected cell. I shall elaborate on each here for anyone interested.
Metric Descriptions:
1. Beta: measures the sensitivity of an asset's returns to the overall market returns. It indicates how much the asset's price is likely to move in relation to a benchmark index. A beta of 1 suggests the asset moves in line with the market, while a beta greater than 1 implies the asset is more volatile, and a beta less than 1 suggests lower volatility.
2. Alpha: is a measure of the excess return generated by an investment compared to its expected return, given its risk (as indicated by its beta). It assesses the performance of an investment after adjusting for market risk. Positive alpha indicates outperformance, while negative alpha suggests underperformance.
3. Sharpe Ratio: measures the risk-adjusted return of an investment or portfolio. It evaluates the excess return earned per unit of risk taken. A higher Sharpe ratio indicates better risk-adjusted performance, as it reflects a higher return for each unit of volatility or risk.
4. Sortino Ratio: is a risk-adjusted measure similar to the Sharpe ratio but focuses only on downside risk. It considers the excess return per unit of downside volatility. The Sortino ratio emphasizes the risk associated with below-target returns and is particularly useful for assessing investments with asymmetric risk profiles.
5. Omega Ratio: measures the ratio of the cumulative average positive returns to the cumulative average negative returns. It assesses the reward-to-risk ratio by considering both upside and downside performance. A higher Omega ratio indicates a higher reward relative to the risk taken.
6. Z-Score: is a statistical measure that represents the number of standard deviations a data point is from the mean of a dataset. In finance, the Z-score is commonly used to assess the financial health or risk of a company. It quantifies the distance of a company's financial ratios from the average and provides insight into its relative position.
7. Average Daily Range: ADR represents the average range of price movement of an asset during a trading day. It measures the average difference between the high and low prices over a specific period. Traders use ADR to gauge the potential price range within which an asset might fluctuate during a typical trading session.
Utility:
Comprehensive Overview: The indicator allows for monitoring up to 40 cryptocurrencies simultaneously, providing a consolidated view of essential metrics in a single table.
Efficient Comparison: The heatmap-like coloring of the cells enables easy visual comparison of different cryptocurrencies, helping identify relative strengths and weaknesses.
Risk Assessment: Metrics such as Beta, Alpha, Sharpe Ratio, Sortino Ratio, and Omega Ratio offer insights into the risk associated with each cryptocurrency, aiding risk assessment and portfolio management decisions.
Performance Evaluation: The Alpha, Sharpe Ratio, and Sortino Ratio provide measures of a cryptocurrency's performance adjusted for risk. This helps assess investment performance over time and across different assets.
Market Analysis: By considering the Z-Score and Average Daily Range (ADR), traders can evaluate the financial health and potential price volatility of cryptocurrencies, aiding in trade selection and risk management.
Features:
Reference period optimization, alpha and ADR in particular
Source calculation
Table sizing and positioning options to fit the user's screen size.
Tooltips
Important Notes -
1. The Sharpe, Sortino and Omega ratios cell coloring threshold might be subjective, I did the best I can to gauge the median value of each to provide more accurate coloring sentiment, it may change in the future.
The median values are : Sharpe -1, Sortino - 1.5, Omega - 20.
2. Limitations - Some cryptos have a Z-Score value of NaN due to their short lifetime, I tried to overcome this issue as with the rest of the metrics as best I can. Moreover, it limits the time horizon for replay mode to somewhere around Q3 of 2021 and that's with using the split option of the top half, to remain with the older cryptos.
3. For the beginner Pine enthusiasts, I recommend scimming through the script as it serves as a prime example of using key features, to name a few : Arrays, User Defined Functions, User Defined Types, For loops, Switches and Tables.
4. Beta and Alpha's benchmark instrument is BTC, due to cryptos volatility I saw no reason to use SPY or any other asset for that matter.
Crypto Portfolio ManagementCrypto Portfolio Management
This is an indicator not like the other ones that you regularly see in tradingview. The main difference is that this indicator does not plot a value for each candle bar like you would see with RSI or MACD. Actually it is table and it just uses tradingview great database of assets to plot some valuebale information that can not be found elsewhere easily. These metrics are some basic one that is used by portfolio managers to decide what they want to hold in their portfolio. The basic idea is that you should hold assets in your basket that are less correlated to the benchmark.
Benchmark in traditional context refers to main market indices like S&P 500 of US market. But they already have a lot of tools available. My effort was for crypto investors who are trying to rebalance their portfolio every month or week to have some good metrics to make decision. Because of this I used Bitcoin as crypto market benchmark. So, everything is compared to bitcoin in this script. I’m gonna explain the terms that is used in the table’s columns below.
MAKE SURE YOU PUT YOUR CHART AT DAILY AND AT THE MAXIMUM AVAILABLE DATA EXCHANGE.
Y-Exp
This is yearly expected return of the asset. It is simply the mean of the yearly returns of the asset. (these calculations are not typical in Tradingview because mainly we calculate on each bar and give value at the same bar but here this value to change once a year). Remember that the higher this value is the better it is because historically the asset have shown good returns but there is a tip: Always check the available historical data in any asset that you are adding if you add an asset that has only 1 year of data available or you use an exchange data that recently added the coin you will get unsignificant results and the results can not be trusted. You should always selects coins and market (coins can be changed in setting) that have the largest data available.
Y-SDev
This is a little bit complicated than the previous. This is the standard deviation of the yearly returns. This is a classic measure of RISK in financial markets. The higher the value, the more risk is involved with the asset that you have added. If you added two assets that have same returns but different Standard deviations, the rational thinker should choose the asset with lower Standard deviation.
The standard deviation is a good place to start but there are some considerations to have -it is getting complicated and average user should not be involved with these terms and can ignore the next phrases- standard deviation and mean of the yearly returns are random variables, these variables have a theoretical probability density function and these functions are not gaussian normal distribution. Because of this in the professional usage these returns should be transformed to a normal distribution and have all these terms calculated there and then transform back to its own normal state and then be used for any serious investment decision. I think these calculations can be done on Tradingview but I need you support to do this in the form of like and share of my scripts and ideas.
M-Exp and M-SDev
These terms are like the previous ones but it is calculated on monthly returns. As it goes for yearly return, the monthly returns change once a monthly candle closes. So be patient to use this indicator.
I highly recommend not to make decisions on monthly data due to a lot of noise involved with this market but in long run it is ok. So go with yearly returns and wait at least for 3 years to see your results.
CorToBTC
Basically you want to buy something that is less correalted with the benchmark. this is the correlation of the asset to bitcoin.
Sharpe Ratio
This is one of the most used metric as a risk adjusted return measurment. you can google it for more information. The higher this value the better. remmeber with any invenstment it is important to understand risks associated with the assets that you are buying.
DownFromATH
This metric that I didn't see anywhere in the tradingview and is familiar in the platforms like coinmarketcap. this is a real calculation of precentage down from ATH (All Time High). it means how much percentage a coin is down from the maximum price that the asset has experienced until now.
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Remember you can change all the asset except main asset. If you like this script to 500 I will update this continuously.
Linear Regression Relative Strength[image/x/iZvwDWEY/
Relative Strength indicator comparing the current symbol to SPY (or any other benchmark). It may help to pick the right assets to complement the portfolio build around core ETFs such as SPY.
The general idea is to show if the current symbol outperforms or underperforms the benchmark (SPY by default) when bought some certain time ago. Relative performance is displayed as percent and is calculated for three different time ranges - short (1 mo by default), mid (1 quarter), and long (half a year). To smooth the volatility, the script uses linear regression to estimate the trend and takes the start and the end points of the linear regression line to compute the relative strength.
It is important to remember that the script shows the gain relative to SPY (or other selected benchmark), not the asset's gain. Therefore, it may indicate that the asset is profitable, but it still may lose value if SPY is in downtrend.
Therefore, it is crucial to check other indicators before making a decision. In the example above, standard linear regression for one quarter is used to indicate the direction of the trend.
