This website uses cookies to ensure you have the best experience. Learn more

Sharp Ratio Essay

541 words - 3 pages

Soundsleep Assignment 2

Subject: Sound sheep funds ranking

Per your request, I have compared the five funds based on the sharpe ratio, and Jensen alpha calculations. I also compared the result to the earlier analysis done based on average return, standard deviation and beta.
Sharpe ratio, measures investment performance of the portfolio compared to risk taken. It’s most appropriate to use when evaluating diversified portfolios. Sharpe ratio penalizes non-diversified portfolios by also taking into account unsystematic risk. The high sharpe ratio represents the better performance for taking on additional risk. Wallflower Value Fund (WVF) shows the highest performance. The lowest is Mega Multinational Fund (MMF) (figure 1).

Figure 1
Jensen's alpha is ...view middle of the document...

The beta of the fund is close to 1.0, the slope beta is slightly above 1.0, the Stdev relative to the average return is reasonable. Base on the alpha and sharpe’s calculation, the fund is receiving a high return while managing the risk. If we agree that the past performance will be a good indicator that the fund might manage the same performance in the future, the WVF is the best performance fund.
Mega Multinational fund (MMF) and Fast Track Fund (FTF) are the lowest performed funds based on the lowest sharpe ratio and alpha accordingly. The average return and Stdev for both of these funds showed the same result. The level of risk is too high for the return that is offered. Small move in the market or systematic risk can cause a huge lost for these two funds.
A risk averse investor might mix Soundsleep S&P 500 and Wallflower funds to manger the risk better. The weight of the investment of each fund can be measured base on the risk free rate and Capital Asset Pricing Model (CAMP) return.
Reviewing the funds I did not considered the objectives of each fund. I concentrated on the risk and performance of the fund for the level of the risk and volatility. I did consider that all funds have a positive correlation and are moving in the same direction. There is a relationship between the average return earned on asset and the volatility of the asset, the higher volatility will have a higher return. Risks that cannot be diversified are important. The return on the stock should be proportional to the part of the stock which cannot be eliminated by holding the diversified portfolio. The CAMP beta will calculate the level of risks that cannot be diversified away and will help to assess how much each fund should weight within the portfolio. Figure 2 above shows all data calculated for these funds.

Other Essays Like Sharp Ratio

Accounting Essay

1404 words - 6 pages observed in 2004, indicates that managers now accept tough conditions ahead and this leads to sharp reduction in share prices. So a progressive dividend policy, even at times of adverse conditions, prevents rapid share fall. PE ratio Hays plc’s price to earning ratio, as taken from Financial Times, was 38.51 on 9th March 2005 (Financial Times). This multiple is based on a share price of 133 p and an earning per share of 3.45 p. Financial Times website

Jet Task 1 Essay

5465 words - 22 pages company would be a lot stronger if they were to lower their liabilities and increase the stockholder’s equity (Horngren et al., 2009). Trend Analysis The historical trend analysis for Competitive Bikes looks strong. Using Year 6 as the base year, Year 7 saw a 133.3% increase in net sales. Year 8 saw a 113.3% increase in sales over Year 6. This means that the company had a sharp increase in sales in Year 7, and a smaller increase over the

Role of Banks in Uae Economy

988 words - 4 pages sharp improvement in property prices. That makes much of the collateral that banks hold more valuable. • UAE’s largely favorable macro backdrop, adequate liquidity in the banking system and low interest rates are tailwinds for banks’ credit quality. Growth in recent months for the country’s non-oil private sector. Banks earnings proved resilient so far to oil prices. • US Fed Rates: Banks with a relatively high mix of deposits and

Target Annual Report

2135 words - 9 pages payable account, but if you go further down the financial statement, there is an accrued and other current liabilities section, which is broken down in depth under note 17. This note shows that the wages and benefits account is the largest liability account. Despite a sharp decline in cash and cash equivalents on hand during the 2008 fiscal year, Target’s current ratio improved from the prior year’s ratio of 1.605 to a ratio of 1.664. The

Global Crises

572 words - 3 pages Rs 4280 Rs 4397 cr (Source: Annual Reports, figure include investment in subsidiaries & associates) Indian Financial: Again in Limelight • Indian banks have nearly 30% of balance sheet in government bonds • Bonds is only asset class benefited form sharp G-sec rally over last two months • Inflation expectation have tempered & global cridit crisis has given much need trigger for monetary easing â

Panera Case Study Analysis

1697 words - 7 pages useful way to determine the factors that affect the increase or decrease in equity. This is exemplified in Panera’s income statement beginning in 2007 when they began to take on debt. The increase in debt also caused an increase in interest expenses. This directly affects the profit margin by reducing it which decreases the company’s overall return on equity. The sharp decline in the value of equity causes their equity multiplier to rise. This

Financial Data Analysis

1377 words - 6 pages ) | includes adjustment due to auditFinancial statement analysis is important to boards, managers, payers, lenders, and others who make judgments about the financial health of organizations. One widely accepted method of assessing financial statements is ratio analysis, which uses data from the balance sheet and income statement to produce value that is easily interpreted for financial meaning. Most hospitals, health systems and other healthcare

Shareholder Wealth Creation

5940 words - 24 pages trades on 14 times forecast earnings for this year, rising slightly to 14.1 for the year ending 31 December 2017. The firm’s P/E rating is moderate and on a par with GlaxoSmithKline, but the shares offer a strong dividend that should be attractive to income hunters, despite the firm’s challenges (Mohamed, 2016).” Glaxo’s full year results announced last month revealed an increase in revenues to £24bn, up from £23bn, and a sharp rise in pre-tax

Financial Analysis Assigment-Vodafone

1928 words - 8 pages the expansion of 4G coverage in all regions, has has contributed to the surging capital expenditures, as a result, contributed to the declining Free Cash Flow. Credit analysis 31-Mar-13 31-Mar-14 31-Mar-15 Current Ratio 0.75 0.99 0.69 Quick Ratio 0.6 0.81 0.56 Debt/Equity 0.41 0.3 0.34 For the past 3 financial years, the stability of Solvency and Liquidity indicators reflect that Vodafone is

Marginal Costing

4910 words - 20 pages contribution = Contribution P.U. X No. of Units." Total Sales - Total Variable Cost.P/v Ratio: P/v Ratio stands for Profit /Volume Ratio. However, it is ratio of contribution to sales. (The term Profit is used as fixed costs are not considered in Marginal Costing technique & profit is same as Contribution).= P/v Ratio = Contribution / Sales; Sales-Variable Costs/ Sales;1-V.C/Sales; Change in Profit(Contribution)/Change in Sales;BEP (Break

Bangladesh

1818 words - 8 pages have been able to increase their NII by reducing their cost of funds. The NII of PCBs & FCBs has been very high over the period from 2000 through 2007. The trend of NII indicates that the PCBs & FCBs are charging interest at very high rates on their lending as compared to their interest they are paying to the depositors. There were significant increases in risk weighted capital asset ratio (RWCAR) for all banks to 11.7% in June 2009 from

Related Papers

Fin/571 Week 3 Individual Essay

1527 words - 7 pages ). Comparison of Ratios between years The difference represents either an increase or decrease in current assets such as inventory and goods in stock of Home Depot or by a corresponding increase or decrease in current liabilities such as overdrafts. A sharp decrease signifies the liquidity of the company declined, probably because the current assets declined whereas the current liabilities increased. Leverage Ratio Leverage ratios are used to

Chapter 2 Modern Building Supply Essay

1154 words - 5 pages profits. It has also moved aggressively to acquire new customers. Sales terms are 2/10, n/30. All sales are on account. Assume that the following ratios are typical of companies in the building supply industry: Current ratio . . . . . . . . . . . . . . . . . . 2.5 Acid-test ratio . . . . . . . . . . . . . . . . . 1.2 Average collection period . . . . . . . . 18 days Average

Finance Comparison Essay

986 words - 4 pages for a falling gross margin despite the rising sales is the increase in the company’s variable costs of production. Ford Motor Company has also experienced a fall in gross margin from 17% to 16%. Nevertheless, the company is still able to cover its costs and function at a profit. Ratios | General Motors | Ford Motors | Operating cash flow | 0.2 | 0.1 | Working capital | 1.3 | 2.1 | FCF | 0.2 | 0.4 | Debt Ratio | 7% | 55% | Equity

Pythagorean Vs. Equally Tempered Tuning Is A Paper Discussing The Differences, Pros, And Cons Of The Two Systems Of Tuning Musical Instruments. Complete With 6 Source Bibliography

1278 words - 6 pages sounds ranging from 20Hz to 20kHz. However, dogs can hear sounds at 50 kHz or higher. This is why dog whistles cannot be heard by humans, but can by dogs; because their frequency is above our hearing range, but still within that of dogs.Discovered around 530 BCE, Pythagoras' Scale was a very natural sounding scale. It was first discovered, when Pythagoras realized that when you pluck two strings of a certain ratio to each other, it makes a "pretty