Description:
Sharpe-Ratio calculation and explanation for Microsoft and Amazon stocks while using the S&P 500 as a benchmark.
Sharp-Ratio??
In finance, the Sharpe ratio measures the performance of an investment compared to a risk-free asset, after adjusting for its risk. It is defined as the difference between the returns of the investment and the risk-free return, divided by the standard deviation of the investment.
When faced with investment alternatives that offer both different returns and risks, the Sharpe Ratio helps to make a decision by adjusting the returns by the differences in risk and allows an investor to compare investment opportunities on equal terms, that is, on an 'apples-to-apples' basis.
Notebook takeaways
In this notebook you will learn the following:
- Downloading stocks and indexes using the Pandas DataReader package
- How to calculate, plot, and compare the percentage returns
- Lastly, how to calculate and interprete the Sharpe-Ratio
Packages
- pandas
- numpy
- matplotlib
- pandas-datareader
- If you have not installed the package yet, please refer to this website: https://pypi.org/project/pandas-datareader/
- datetime
Enjoy and stay tuned!