Sharpe Ratio Alternative
-
The
Positive Trade Ratio
PositiveTrade Ratio is a reward-to-variability ratio similar to
Sharpe ratio.
Both provide a measure of profit per unit of risk.
Like the Sharpe ratio, PTR is directly computable from any
observed series of returns without need for additional information surrounding
the source of profitability.
PTR was developed to overcome the Sharpe ratio limitation where
investments with excessive profits are effectively punished for being
successful, due to the use of standard deviation.
Instead of factoring any deviation from the mean, PTR
calculates only the standard deviation of losing trades.
Therefore PTR is similar to the Sortino ratio, except it is
simplified in that there is no need for a Minimum Acceptable Rate of Return
(MAR) or Downside Deviation (DD).
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