Performance Parameters

To evaluate leveraged strategies, it makes little sense to use annual returns as percentages, since leverage could make them as high as one desires, at the cost of taking on more risk. A widely used measure is Sharpe's ratio defined as the ratio between annualized returns over the money-market rate divided by the annualized standard deviation of the value of the portfolio. 

Based on a historical performance of the portfolio we expect: 

  • the average annual return to be around +22%
  • the combined (annualized) Sharpe ratio to exceed 2