What are the key factors to consider when determining the Sortino ratio for digital assets?

1 answers

• Nov 29, 2021 · 3 years ago
  When it comes to determining the Sortino ratio for digital assets, there are a few key factors that need to be considered. Volatility is one of the main factors, as it measures the fluctuation in the asset's price. Higher volatility generally leads to a lower Sortino ratio, indicating higher risk. Another important factor is the downside deviation, which measures the volatility of negative returns. A higher downside deviation will result in a lower Sortino ratio. Lastly, the risk-free rate of return is used as the benchmark for the Sortino ratio calculation. A higher risk-free rate will lead to a higher Sortino ratio. By taking these factors into account, investors can better evaluate the risk-adjusted return of digital assets and make informed investment decisions.
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