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Wrong Definition of Sharpe Ratio in Zorro? #487524
05/29/23 06:32
05/29/23 06:32
Joined: Apr 2023
Posts: 22
V
vicknick Offline OP
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vicknick  Offline OP
Newbie
V

Joined: Apr 2023
Posts: 22
In Zorro performance report, sharpe ratio is defined as "annualized ratio of mean and standard deviation of the bar returns when the system is in the market; Bar returns are bar profits divided by invested or required capital."

However, the actual definition does not depend on the invested capital, meaning if I risk 10% of $1000, or 1% of $10000, my sharpe ratio should be the same. This allows us to able to compare the risk-adjusted return of different strategies. But in Zorro, risking the same amount but with different Capital will result in different Sharpe ratio.

Last edited by vicknick; 05/29/23 06:33.
Re: Wrong Definition of Sharpe Ratio in Zorro? [Re: vicknick] #487540
06/02/23 12:19
06/02/23 12:19
Joined: Jul 2000
Posts: 27,987
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jcl Offline

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jcl  Offline

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Joined: Jul 2000
Posts: 27,987
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Re: Wrong Definition of Sharpe Ratio in Zorro? [Re: jcl] #487550
06/04/23 06:30
06/04/23 06:30
Joined: Apr 2023
Posts: 22
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vicknick Offline OP
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vicknick  Offline OP
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Joined: Apr 2023
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But why when I increase the capital, the sharpe ratio increase as well? The definition is independent of the capital.

Last edited by vicknick; 06/04/23 06:31.
Re: Wrong Definition of Sharpe Ratio in Zorro? [Re: vicknick] #487560
06/05/23 14:21
06/05/23 14:21
Joined: Jul 2000
Posts: 27,987
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jcl Offline

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jcl  Offline

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Joined: Jul 2000
Posts: 27,987
Frankfurt
Well, what happens when you increase the capital? That depends on your script, but usually you'll then get different profits, a different return, and of course a different Sharpe.

All data on which the Sharpe is based can be found in your log and performance report.


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