The statistics covered on this page are found on the "Analysis" page (file tab) of the RINA Systems, Inc. Portfolio Evaluator Version 2000 report.

Shape Ratio

The statistics covered on this page are found on the "Analysis" page (file tab) of the RINA Systems, Inc. Portfolio Evaluator Version 2000 report.

Average annualized monthly returns (in %) minus the risk-free rate (interest rate setting) divided by the standard deviation of monthly returns. The higher the number, the greater the return in relation to variability of returns. Typically, Sharpe Ratios above one are considered to be indicative of good performance.

Lars Kestner created a ratio that gauges performance by examining the consistency of returns with respect to time. Calculations for return and risk are derived from VAMI (value added monthly index). VAMI is a monthly plot of the progress of a hypothetical $1000 initial investment. Because the consistency of returns is examined with respect to time, the K–Ratio provides a good evaluation of equity performance.

Calculations for return and risk are derived from VAMI (value added monthly index). VAMI is a monthly plot of the progress of a hypothetical $1000 initial investment. Although the example below employs a base 10 log, using another log base will result in the same final value.

Running a linear regression on the log-VAMI curve reveals several details about performance. The slope of the regression line (the numerator of the K-Ratio) characterizes the return. The steeper the slope, the faster the money has been made. Risk in the K-ratio is measured by the standard error of the slope, a value calculated from the regression. The standard error measures the smoothness of the regression line of the log-VAMI. The higher the standard error the higher volatility of returns which is usually viewed as an equivalent of risk. The denominator of the K– Ratio is multiplied by the square root of observations to normalize the measure across different time frames.