Blog Posts

Maximum Downside Exposure (MDE) is a risk metric used in finance to measure the most significant loss that an investment or a portfolio could have experienced over a specified period. This measure is useful for understanding the worst-case scenario risk. So, it gives an idea of the potential losses a trade or investor might face […]

The Modigliani Risk-Adjusted Performance (M2, RAP) is a performance measure for an investment or trading portfolio. It extends the concept of the Sharpe Ratio by adjusting a portfolio’s returns for risk. But it presents the results in a more intuitive, percentage-rate-of-return format.   Calculation and Components Formula M2 is calculated by first determining the Sharpe […]

Conic solvers are used in financial optimization, where accuracy and computational efficiency are most important. Financial optimization involves the use of mathematical models to make optimal decisions regarding trading and investment decisions and risk management. This field often requires dealing with complex constraints and objectives. This is where conic solvers come into play.   Key […]

Downside Beta and Upside Beta, collectively referred to as Dual-Beta, are concepts in finance used to measure the volatility of an asset in relation to a benchmark but in two different scenarios: negative (downside) and positive (upside) market movements This bifurcation allows traders/investors to understand how an asset behaves under varying market conditions. This provides […]

The Upside Potential Ratio is a financial metric used to evaluate the performance of an investment relative to its risk, with a specific focus on the upside, or positive return, potential. This ratio is particularly useful in assessing investments where the concern is not just the volatility, but the nature of the volatility – emphasizing […]

The Bias Ratio is a relatively lesser-known risk-adjusted performance metric. It is designed to quantify and understand the skewness and kurtosis (shape characteristics) of the distribution of investment returns. Essentially, the Bias Ratio helps in identifying whether the returns of a portfolio or asset are normally distributed or if they exhibit a bias due to […]

What Is Multicollinearity? Multicollinearity occurs when two or more predictor variables in a regression model are highly correlated. This correlation can cause problems with model estimation and interpretation. When multicollinearity is present, the coefficient estimates for the individual predictors can be very sensitive to small changes in the data. This means that the estimates may […]

Below we look at how to install Python in R Studio. For those who like using both R and Python and enjoy using R Studio as an IDE, this is a convenient way to do things.   How to Install Python in R Studio To install Python in R Studio just copy-paste our scripts below. […]

Style Drift refers to the gradual or sudden shift in an investment portfolio’s strategy or asset allocation from its stated investment style or objective. This phenomenon typically occurs in actively managed portfolios where the fund manager deviates from the fund’s proclaimed investment strategy. This leads to a change in the risk and return characteristics of […]

The Lipper Average, often referred to as the Lipper Index, is a set of benchmarks created by Lipper Analytical Services (acquired by Thomson Reuters in 1998), a well-known firm in the field of mutual fund research. These averages are used to compare the performance of mutual funds and other investment vehicles. Each Lipper Average represents […]