Course Name: Trading Alphas: Mining, Optimisation, and System Design, Section No: 13, Unit No: 8, Unit type: Notebook
Hello, when in this notebook you compute the risk adjusted performance of the strategy by dividing the mean return of the strategy by its std, why then you moltiply by 2?
Hello Manuel,
As mentioned in the notebook in Section 5 Unit 1, "Risk-adjusted returns tell us how much money our strategy is making against every dollar that we risk. To do this, we divide the mean of the returns by the standard deviation of the returns and multiply it with the square root of the periods we see in one year. In this case, the period is 4 quarters, hence the square root is 2."
You can of course choose the period which you want to keep.
Hope this helps.