Sharpe Ratio Questions

I'm hoping someone can clear up a misunderstanding on my part in regards to using the Sharpe Ratio, or show me another way to compare risk-weighted results.

I was interested in using the Sharpe Ratio or something like it to help highlight areas in which my reward may have been enormous, but so was my risk, making it a less-than-ideal trade model. As I went looking about, I found that the Sharpe Ratio is only useful in comparing two securities/portfolio's/methods with the same risk profile, and it then posits which would reward you better.

Hopefully I got that bit right.

What I would like is some sort of equation that flattens or equalizes the reward, and then quantifies the risk of each security/portfolio/method relative to each other.

Or something that blends both, where we can see not only which one performed best, but which one took more risk.

I am hoping this is not some dumb newbie question, and any input would be appreciated.

Thanks in advance

(very short, couple of posts),
perhaps MAR Ratio is what you are looking for?

http://www.forexfactory.com/showthre...25#post3197525

Hey Low,

Sharpe Ratio is usually used in a portfolio context where you compare the expected returns of a portfolio versus the risk-free rate and divide that by the Standard Deviation of the returns. Therefore the higher the number the better.

So basically if you have 2 portfolios, you'd look at what their returns were over a given period of time, what the volatility of the returns was over that period of time and plug them into the Sharpe Ratio equation:

E(R)-Rf
---------
Stdev (R)

Not sure that's exactly what you're looking for....