## Sharpe Ratio – What is the Sharpe Ratio?

Sharpe and is used to help investors understand the return of an investment compared to its risk.1

The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Volatility is a measure of the price fluctuations of an asset or portfolio.

Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. The risk-free rate of return is the return on an investment with zero risk, meaning it’s the return investors could expect for taking no risk. The yield for a U.S. Treasury bond, for example, could be used as the risk-free rate.

Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.

ADF has a sharpe ratio of XX

## Draw Down & Volatility – Why are they important?

In trading, a drawdown refers to an reduction in equity, i.e. the value of the fund. It is an important measure of volatility. Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the investment.

ADF has a max draw down of XX

## Understanding Correlation

Correlation is a statistic that measures the degree to which two investments move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.

+1.0 means the two investments are perfectly correlated, meaning they move up and down together. I.

-1.0 means the two investments move up and down in opposite. I.e if Gold is up, Stocks are down.

In finance, the correlation can measure the movement of a stock with that of a benchmark index, such as the S&P 500.