(There is a concept called a "Sharp Ratio."
[The Sharp Ratio is a measure of a portfolio's excess return relative to the total variability of the portfolio. It is named after William Sharp, Nobel Laureate, and inventor of the capital asset pricing model.
Let the annualized return of the portfolio be R, the risk free interest rate r, and the annualized volatility V, then the Sharp Ratio is (R-r)/V
......
Most amateur traders will not be able to achieve a Sharp ratio of one. Good fund managers can achieve a Sharp Ratio of 2 or 3 for long terms. Some very talented equity and FX traders can achieve a Sharp Ratio of 5 or 7.
......
http://www.optionetics.com/bbs/topic.asp?fid=64&id=17753]
In Japan, they sometimes call "V" the standard variation or simply a risk, and use an interest rate of the US Treasury Bond as "r."
If the fund A has 30% of a return and 30% of a risk with "r" ignored, the Ratio is 1.
If the fund B has 10% of a return and 3% of a risk with "r" ignored, the Ratio is 3.33.
Then you have to take the fund B.
However, it tells how business makes people as dry as dust.
There is a hidden coefficient called "human value."
[Decision] = [Ratio] x [Human-Value-for-Specific-Transaction]
Another point is that a drastic change in an interest rate of the US Treasury Bond will trigger a great confusion in the money industry worldwide.
As a bonus, profits estimated can be simply linearly added, but risks estimated, "irrelevant to one another," should be a square root of the sum of squares of each risk value; the total risks grow slower than total profits. It supports the diversified investment strategy.
Most importantly, just like WWII put an end to the era influenced by the Great Depression, any international tragedy that widely affects domestic situations in the U.S. can blow off all the discussions and mathematics in the financial sector.
Those who get blind by arguing "10% of a return and 3% of a risk" sometimes help such an international tragedy happen, which offers 10,000% and 3,000% but as the ratio is still 3.33 satisfying them in office somewhere in Washington D.C. or Wall Street. That is why 3,000 US casualties in Iraq are nothing for them.
This can be an issue in Possible Presidential Candidates Discussions to be held by MSNBC or CNN again, can't it?)
"Every Valley Must be Filled up, Every Hill and Mountain Leveled Off"
[The Sharp Ratio is a measure of a portfolio's excess return relative to the total variability of the portfolio. It is named after William Sharp, Nobel Laureate, and inventor of the capital asset pricing model.
Let the annualized return of the portfolio be R, the risk free interest rate r, and the annualized volatility V, then the Sharp Ratio is (R-r)/V
......
Most amateur traders will not be able to achieve a Sharp ratio of one. Good fund managers can achieve a Sharp Ratio of 2 or 3 for long terms. Some very talented equity and FX traders can achieve a Sharp Ratio of 5 or 7.
......
http://www.optionetics.com/bbs/topic.asp?fid=64&id=17753]
In Japan, they sometimes call "V" the standard variation or simply a risk, and use an interest rate of the US Treasury Bond as "r."
If the fund A has 30% of a return and 30% of a risk with "r" ignored, the Ratio is 1.
If the fund B has 10% of a return and 3% of a risk with "r" ignored, the Ratio is 3.33.
Then you have to take the fund B.
However, it tells how business makes people as dry as dust.
There is a hidden coefficient called "human value."
[Decision] = [Ratio] x [Human-Value-for-Specific-Transaction]
Another point is that a drastic change in an interest rate of the US Treasury Bond will trigger a great confusion in the money industry worldwide.
As a bonus, profits estimated can be simply linearly added, but risks estimated, "irrelevant to one another," should be a square root of the sum of squares of each risk value; the total risks grow slower than total profits. It supports the diversified investment strategy.
Most importantly, just like WWII put an end to the era influenced by the Great Depression, any international tragedy that widely affects domestic situations in the U.S. can blow off all the discussions and mathematics in the financial sector.
Those who get blind by arguing "10% of a return and 3% of a risk" sometimes help such an international tragedy happen, which offers 10,000% and 3,000% but as the ratio is still 3.33 satisfying them in office somewhere in Washington D.C. or Wall Street. That is why 3,000 US casualties in Iraq are nothing for them.
This can be an issue in Possible Presidential Candidates Discussions to be held by MSNBC or CNN again, can't it?)
"Every Valley Must be Filled up, Every Hill and Mountain Leveled Off"