How can I calculate the Sharpe ratio for my digital asset investment portfolio?

1 answers

• Dec 19, 2021 · 3 years ago
  Calculating the Sharpe ratio for your digital asset investment portfolio is crucial to evaluate its risk-adjusted performance. Here's a step-by-step guide: 1. Determine the average return of your portfolio by summing up the returns of each asset and dividing it by the number of assets. 2. Find the risk-free rate of return, such as the return on a government bond or a stablecoin. 3. Calculate the standard deviation of your portfolio's returns. This measures the volatility or risk of your portfolio. 4. Subtract the risk-free rate from the average return of your portfolio. 5. Divide the result by the standard deviation to obtain the Sharpe ratio. The Sharpe ratio helps you assess the risk-adjusted performance of your portfolio. A higher Sharpe ratio indicates better risk-adjusted returns. Remember to regularly review and adjust your portfolio to optimize your investment strategy.
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