Challenge: Sharpe Ratio Analyzer
Automating the evaluation of portfolio performance is a key step in modern FinTech workflows. The Sharpe Ratio is a foundational metric for assessing risk-adjusted returns, helping you compare portfolios with different risk profiles on a level playing field. By calculating the Sharpe Ratio programmatically, you can quickly determine whether a portfolio's returns justify the risks taken, and categorize its performance for better investment decision-making.
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Write a function that calculates the Sharpe Ratio for a portfolio and categorizes its performance.
- Compute the average of the values in
returns. - Compute the standard deviation of the values in
returns. - Calculate the Sharpe Ratio using the formula: (average return - risk_free_rate) divided by the standard deviation of returns.
- If the Sharpe Ratio is greater than 1, categorize performance as "good".
- If the Sharpe Ratio is greater than 0 but less than or equal to 1, categorize as "average".
- If the Sharpe Ratio is less than or equal to 0, categorize as "poor".
- Return the Sharpe Ratio from the function.
Рішення
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What is the formula for calculating the Sharpe Ratio?
Can you explain how to interpret different Sharpe Ratio values?
How can I automate the calculation of the Sharpe Ratio for my portfolio?
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Automating the evaluation of portfolio performance is a key step in modern FinTech workflows. The Sharpe Ratio is a foundational metric for assessing risk-adjusted returns, helping you compare portfolios with different risk profiles on a level playing field. By calculating the Sharpe Ratio programmatically, you can quickly determine whether a portfolio's returns justify the risks taken, and categorize its performance for better investment decision-making.
Swipe to start coding
Write a function that calculates the Sharpe Ratio for a portfolio and categorizes its performance.
- Compute the average of the values in
returns. - Compute the standard deviation of the values in
returns. - Calculate the Sharpe Ratio using the formula: (average return - risk_free_rate) divided by the standard deviation of returns.
- If the Sharpe Ratio is greater than 1, categorize performance as "good".
- If the Sharpe Ratio is greater than 0 but less than or equal to 1, categorize as "average".
- If the Sharpe Ratio is less than or equal to 0, categorize as "poor".
- Return the Sharpe Ratio from the function.
Рішення
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