The Sharpe Ratio Explained (by a quant trader)

[@faxexmachina921]

Finally a mathematically motivated, bottom-up explanation of financial theory. Subscribed

[@salazarbernardo]

Come on dude, you can't just abandon the channel like that! You lecture like a pro! Please keep doing it! Just brilliant work here. We don't need fancy guru-like explanations, we need more of this!

[@AHoboWithAStick]

Anyone that starts investing should be required to watch this until they memorize it word for word. Great video & explanation 👌

[@tradesbyj7112]

I am only 6 minutes in and subscribed: finally a channel that speaks my language and actual shows the mathematics and explains it. Will keep watching

[@andreipopescu4475]

One of the best videos I've seen on KZbin! You just summed up an entire University Course in one video, and for someone with a small background in this stuff maybe even more. Thank you so much!

[@ephraimvasilyev5916]

Great quality for 1st video, keep it up mate

[@gunzzilla]

The only channel that only has 1 vid yet I subscribed to. Pls upload more vids!

[@dirk.no-whisky.4u]

Immediately subscribed, great content man

[@Johnsormani]

Wow that’s a very thorough explanation! Thanks

[@trinimusa4069]

Man dropped his piéce de résistance and dipped. Rip to a loved one

[@HappyHappyFun99]

Wow. This is one of the most easy to understand, yet information-dense videos I've ever watched! Subscribed!🎉❤

[@maarkoo2775]

Amazing explanation. Keep on going!

[@jona_ko208]

Very good content. You will get a lot of followers in no time

[@thehiddenedge24]

This is awesome. Keep up the great work, I’m subscribed!

[@iFastee]

the highest level of sharpe ratio in my personal opinion is to ignore all volatility while in profit/above NAV and only measure/weight in the negative volatility. this is because i dont care about volatility spikes induced by large moves up on my portfolio/"winning" variability. and you may question "well why would you have a different average variability while going up on whatever baseline investment compared to while below that? the answer is "i dont know, but you probably dont know either and should check that out"

[@StefanReich]

Perfectly explained

[@LeweiFu]

Love this video its so detailed and easy for an introductory video and learnt a lot, thank you!

[@smohan123]

This is really really really really really really good. Subbed

[@davidhuber563]

Continue man !!!! This is good stuff we want more videos like this !

[@dvdpro3726]

Awesome video ! Looking forward to see what else you'll make !

[@itskartikarora]

more videos please

[@virtualmetherephotography]

Great video summarising Sharpe's and volatility.

[@Dr.yrj_singh]

Thanks brother add more videos related to quants and financial theory

[@ignacioiturralde927]

This is a masterpiece.

[@kps.mp4]

Excellent explanation, brother. Thank you 🙏

[@junal27]

Great explanation, please more videos soon!

[@lawand60]

Brilliant! Keep up the good work.

[@xv0047]

You are a great explainer.

[@thewallstreetquants]

Thank you!

[@anandn6594]

1st comment from an Indian finance enthusiast. This channel is gonna reach heights. Don't stop posting🙌🏻

[@thewallstreetquants]

Appreciate it thank you sir!

[@aniketgupta4407]

Hey bro are u in Ca final?

[@thewallstreetquants]

?

[@aniketgupta4407]

@@thewallstreetquants It is the course which is equivalent to CPA. I am asking this Anand

[@Kimthepowerfuljong-un]

Why indians are always telling their country?

[@alan_kss1377]

Great video! You will become 3b1b of quant finance!

[@thewallstreetquants]

The goat!

[@AaronNicholsonAI]

So awesome. Thanks. But why no more videos?

[@compilation_exe3821]

awesome mate!

[@davgrex]

Well explained. Looking forward to more videos from you buddy !

[@YokeRoel]

Very cool video, really enjoyed it! It would be nice to discuss leverage interest ratios and how they relate to amplifying low return, low vol portfolios. It would also be great to get an overview of general anticorrelated asset basics. Historical trends and reasoning behind it

[@AEVMU]

Black also has a lower safe withdrawal rate, which for anyone in retirement. is critical. I would even argue that for retired folk, the safe withdrawal rate is even more important than Sharp.

[@guyjansen2302]

Continue posting!

[@kevinayala3878]

Nice video, wish you upload more often

[@imzan3650]

CFA L3 guy here. Subed in 60 seconds.

[@qswedasf]

I think you need to ask for you money back, no offense...

[@tetlamed]

Amazing content! Even the algorithm likes it, I saw this on the home page

[@PeakperformerEmil]

Very interesting

[@longestnamepwnsall]

Thoughts on Sortino? Do you think it’s better because it only penalizes downside risk?

[@ashkantsf]

great one thanks! hope you find more time to share more vds like this! maybe in the future you walk us thro an example of how exactly you do this using yfinance data and gsheet

[@leestephen1309]

keep going bro

[@FF-ms6wq]

Excellent video.

[@GabrielPecunia]

Geat video!!

[@DanielZ1337TM]

Interesting. I did this and figured this out myself through analysis and experimentation, thinking how can I combine different things and what do they mean, how do they interact?

[@propupsg]

Nice explanation

[@jaydevdave7369]

At 11:42 plot the 2x ...4x return of High RET line. You are not comparing apples to apples

[@simonkriznik3437]

If High RET were leveraged 2x or 3x you would get a margin call in July 2019, because leverage also multiplies drawdown. The point of high SR is you can use leverage to achieve higher returns with lower downside risk.

[@lucasm4299]

Good first video! Math going into finance. Always keep it mathematical. Would you cover stochastic processes? High-frequency trading? Options?

[@zahidazdine8139]

well explained, keep going

[@vivekdandare]

this is great video...are you going to post more videos like this?

[@goblin5003]

Nice!

[@diazutube]

keep posting dude.. it's valuable for me as crypto trader

[@gopfriedstutz]

11:48 but you could also just 2x the high ret, or even triple. it would also triple the risk, right? but be an even higher return

[@hansa9159]

The ratio of risk to return (sharpe) remains constant while the return increases. So yes. Volatility increases proportionally. Look up Markowitz frontier if you want to learn about how investors choose between different “non-dominated” risk/return options. Some people might rationally chose an asset / portfolio with r = 10% @ vol = 5%, as opposed to r = 20% @ vol = 10%. It’s a trade-off between risk and return. But generally it’s irrational to take r = 9% @ vol = 5% over r = 20% @ vol = 10%. Since, one could just 0.5 lever the latter strategy to achieve 10%/5%. & vice versa. It allows you to trivially dominate some other portfolios

[@hansa9159]

If you had two assets / portfolios, one with r = 10%, vol = 5%. The second has r = 19%, vol = 10%. Would be irrational to take the second, cuz you could just 2x lever the first one to achieve r = 20%, vol = 10%

[@hansa9159]

Obviously there are borrowing costs to consider, so not a perfect 2x of returns / risk

[@jst9090]

Unfortunately its theory and has nothing to do with the reality. For example you buy a great company wich growths and makes profit every year. Obviously this stock will outpeform the market and your return will be around 10% or even more per year. So know my questions is, is this a risky investment? I say its not, the risk mainly depends on the fundamentals of the company and not how volatil a stick is. Of course when the stock rises in one year 30% and the fundamentals of the companys is still the same then its risky to invest, but not because the rent is higer its because there is a missmatch between stock price and the fundamentals of the company. I hope this helps to understand that risk and rent is not in colleration.

[@hansa9159]

​@@jst9090 You're wrong. We are talking about diversified portfolios / strategies and not individual assets. I.E. Idio risk is already gone. Maybe some style/industry tilt. But individual company risk shouldn't be relevant. The best way to model forward volatility is by observing historical volatility, or by observing the price of derivative products.

[@danc6270]

Great

[@danc6270]

Fire

[@sofusgamborg947]

3:35 arent those arrows meant to be vertical?

[@TheMorhaGroup]

Black is better for activly managed portfolios or day trading

[@hootsgoobs4795]

how do u mix investments?

[@tvvt005]

Where do we access sharp ratios and related graphs for existing stocks?

[@MrDeadlyCrow]

So straight line up is 0 vol?

[@kevinli522]

What if the portfolio daily returns do not follow a normal distribution?

[@tvvt005]

5:03 but why square root? Couldn’t we just multiply by 252

[@carizardsupremo9946]

Because you are multiplying by a factor that affects the terms inside the root, so it’s the same to multiply inside the root or to multiply by square root of 252

[@OverAndOverAndOver]

Bro got shot by citadel

[@thewallstreetquants]

😂

[@Corpsecreate]

Volatility isn't calculated by comparing the difference in the equity curve and the trend-line. It is the difference in each individual change in equity (return) against the average return. These are NOT the same thing.

[@new-agetech5663]

Bro just made a top-quality video and then just disappeared

[@thewallstreetquants]

Maybe not

[@hiflyers3936]

This is why i crush trading. People think volatility is to be controlled instead of riding the waves and accepting your and downs. Less volatility means less returns. There are many unknown traders who make 1000s of percent a year. I'm basketball you can never shoot 3 pointers which was a strategy that has been abandoned because yes you miss more but the average score is much higher. Following Sharpe ratios will die it in time.

[@AB-zv6dz]

Sharpe is a bit like VaR, all the good little quants who read the textbooks carefully and do what they are told and think more education = more money, they all use it, all the experienced traders who go off and start their own fund and make billions say its useless. Quants think Sharpe is useful precisely because they don't understand trading. And last time I checked, I still had to pay my taxes in dollars, the government aren't accepting 'risk adjusted returns' yet....

[@bestintentions6089]

Volatility is where quants make most profit no?

[@thewallstreetquants]

Yes some quants make money during market or macro volatility but you want the volatility of your portfolio to be low all else equal

[@nbnd3342]

In my mind of a crypto monkey, i prefer the black chart because it has a bigger volatility of price action, and i can double down on the dip 😂 ofcourse if you are just holding, or if you are a sane person, green better

[@ikr-b7c]

I think you go wrong thinking that leverage is better with a (?higher sharp?) less volitile stock. What you should do is deversify into the higher retuning graph and the lower lesss volitile graph. You can leverage up the low sharp strategie two. $100 of your money is no different than someone elses just the fee for renting.

[@chetanesque158]

The content is consice and useful; however, the handwriting is terrible!!

[@devanshutayal4586]

Please work on the audio quality. It is sub par!

[@lucasm4299]

No

[@AdventureAddict69]

I didn’t have a problem

[@gopfriedstutz]

You are sub par

[@2an_sound]

how is this sub par audio?