Essential concepts for quant trading, research, and interviews — explained clearly.
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3 concepts
The Sharpe ratio measures risk-adjusted return by dividing a portfolio's excess return over the risk-free rate by its standard deviation, making it the gold standard for comparing strategy performance.
Alpha represents the excess return a portfolio generates above its benchmark (a measure of skill), while beta measures the portfolio's sensitivity to market movements (systematic risk exposure).
Maximum drawdown measures the largest peak-to-trough decline in portfolio value, representing the worst-case loss a strategy has experienced and a key metric for evaluating downside risk.
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