Category: calculators
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Risk premium definition, calculator
Different stocks offer different levels of expected return. What causes stock A’s expected return to be higher than stock B’s expected return? How does the expected return on a risky asset relate to the risk-free rate of return? In this post, we answer both questions by introducing the concept of risk premium. Jump to: Risk […]
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Return volatility formula and calculator
We start this lesson by discussing what is meant by (stock) return volatility. Then, we explain the return volatility formula. Finally, a simple return volatility calculator is provided for your convenience. Jump to: What is (stock) return volatility? Imagine an investor who bought shares of a stock three years ago. According to the investor’s calculations, […]
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Arithmetic average return calculator and formula
In this lesson, we introduce a simple yet really useful measure of investment performance. In particular, we discuss the arithmetic average return formula and provide a practical arithmetic average return calculator. It is really important for investors to be able to accurately assess the performance of their investments. In that sense, arithmetic average (or mean) […]
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Geometric average return calculator and formula
In this post, we explain the geometric average return formula using numerical examples and discuss how it differs from the arithmetic average return. We provide a practical geometric average return calculator as well. Jump to: Geometric average return formula The geometric average return formula (or the geometric mean return formula) can be written as follows: […]
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Treynor ratio formula and calculator
As part of our investments course, we have already covered two important investment performance measures: Jensen’s alpha and Sharpe ratio. In this post, we focus on the Treynor ratio, which is another popular risk-adjusted performance measure. In particular, we explain the Treynor ratio formula and offer an easy-to-use Treynor ratio calculator as well. Jump to: […]
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Jensen’s alpha formula and calculator
When evaluating the performance of mutual funds, ETFs, or your own portfolio, it is vital to do that on a risk-adjusted basis. That is, it would be misleading to compare investment opportunities on the basis of returns only as higher returns normally require bearing more risk. In this post, we discuss one of the most […]
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Sharpe ratio calculator, formula, examples
The Sharpe ratio is a popular tool used in performance evaluation. In this post, we offer a Sharpe ratio calculator as well as explain the formula with examples. Jump to The Sharpe ratio formula The Sharpe ratio takes its name from the Nobel laureate William F. Sharpe, who is among the pioneers of the widely-used […]
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The risk of a portfolio – Calculator and formula
We often say that risk and return are two sides of the same coin. You can’t discuss one without the other. In the previous post, we showed you how to calculate the return on a portfolio of assets. In this post, we explain the formula for portfolio risk. We also offer an easy-to-use portfolio risk […]
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Portfolio return calculator and formula
In this post, we explain the formula behind the calculation of portfolio returns. Furthermore, we provide a free online portfolio return calculator, which works as a portfolio expected return calculator as well as a portfolio realized return calculator. Finally, with this port, we make an introduction to the modern portfolio theory as well. So far […]
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Expected return calculator and formula
When evaluating an asset’s past performance, we can make use of the historical (or realized) average return. In that sense, the historical average return is a backward-looking measure. But, in order to forecast an asset’s future performance, we need a forward-looking measure. This measure is called the expected return. In this post, we explain the […]
