Average historical return is the average monthly return of the portfolio. The expected return of a portfolio can be calculated by multiplying the monthly return of each stock with its respective weight in the portfolio. Summing the above product, that was calculated for each stock return and its weight.

Sharpe ratio is the excess return we are getting on the financial product for every unit of the risk we are taking. TO calculate the Sharpe ratio we need to calculate excess return (portfolio return – risk-free return) and divide it with the standard deviation of the portfolio return.

Relative Sharpe ratio is portfolio Sharpe ratio dived by market Sharpe ratio. One we will calculate the portfolio Sharpe ratio, we will calculate the market Sharpe ratio ((market return – risk-free return)/standard deviation of the market return) and then get the value of relative Sharpe ratio by portfolio Sharpe ratio/market Sharpe ratio.

Jensen’ alpha = (return of portfolio-risk free return)/ (beta of portfolio multiplied to market return – risk

free return).

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