The risk index data facilitates an objective evaluation of the strategy, and the main risk indicators include:
- Policy benefits (Total Returns)
- Strategy Annual income (total annualized Returns)
- Benchmark income (Benchmark Returns)
- Benchmark annual income (Benchmark annualized Returns)
- Alpha: There is a systemic risk (Beta) and non-systemic risk (alpha) in the investment, and Alpha is a return that the investor has nothing to do with market volatility. For example, if an investor gains 15% in return, and the benchmark gains a 10% return, the value added by Alpha is 5%.
| Alpha Value |
explain |
| Α>0 |
The strategy is relative to the risk, gains the excess income |
| Α=0 |
The strategy is relative to risk and gets the right benefits |
| Α<0 |
Strategies are less profitable relative to risk |
- Beta: Represents the systemic risk of investment, reflecting the sensitivity of the strategy to the market change. For example, a strategy of beta is 1.5, then the market gains 1%, the strategy may rise 1.5%, and vice versa. If a strategy has a beta of-1.5, which means the market is up 1%, the strategy may fall by 1.5%.
| Beta value |
explain |
| Β<0 |
The direction of the portfolio and benchmark is usually reversed, such as the short position category |
| Β=0 |
There is no correlation between portfolio and benchmark trends, such as fixed income classes |
| 0<β<1 |
The portfolio and benchmark are moving in the same direction, but with less movement than the benchmark |
| Β=1 |
Portfolios and benchmarks move in the same direction, and the movement of the benchmark is close to |
| Β>1 |
Portfolios and benchmarks move in the same direction, but are more mobile than benchmarks |
- Sharpe ratio (Sharpe): Indicates how much excess compensation will be generated per unit of total risk, and can simultaneously take into account the benefits and risks of the strategy.
- Sortino ratio (Sortino): Indicates how much excess return will be received for each unit of downside risk.
- Information ratio (Information Ratio): A measure of excess revenue from the excess risk of a unit. The higher the information ratio, the higher the excess gain of the strategy unit tracking error. As a result, strategies with larger information ratios are represented by a lower-information-ratio benchmark. The reasonable investment goal should be to pursue the high information ratio as far as possible under the moderate risk.
- Strategy Volatility (algorithm volatility): Used to measure the risk of a strategy, the greater the volatility represents the higher the strategic risks.
- Benchmark volatility (Benchmark volatility): The risk of a strategic benchmark, the greater the volatility, the higher the benchmark risks.
- Maximum drawdown (max Drawdown): Describes the worst possible scenario for a policy, the most extreme possible loss situation.
- Downlink volatility (Downside Risk): strategic earnings downward volatility. The downside standard deviation distinguishes between good and bad fluctuations compared to ordinary earnings volatility.
- Winning percentage: The ratio of the number of WINS to the total number of trades.
- Day winning ratio: the percentage of the total number of days in which the profit exceeds the benchmark.
- Profit/Loss ratio: ratio of period profit loss
Note: Whether it is backtesting or simulation, all risk indicators (Alpha/beta/sharpe/max_drawdown and other indicators) are updated only once a day, and only based on the daily closing earnings, regardless of the daily intraday earnings. Exception:
- minute and tick simulation disks update policy revenue and benchmark revenue per minute
- Daily Demo disk Updates policy revenue and benchmark revenue after opening and closing every day
This can be caused by a drawdown in the yield curve of the simulation, but the Max_drawdown may be 0.
Quantitative Trading risk indicators
