Quant investing: Financial ratios that you must know — part.2

Basics ratios that can help you to assess the return and risk of a strategy, a portfolio, or an asset

picture from EMLV

I. Introduction

Financial ratios are essential tools that investors and analysts use to evaluate the performance of a company, a portfolio, or an investment strategy. These ratios can provide valuable insights into an investment’s return potential, risk exposure, and financial health.

This article relies on different sources. We took into consideration Bourse et Gestion de Portefeuille (Jacques Hamon, 5th edition, Economica) and the online financial encyclopedia Investopedia.

In this article, we will review some of the most useful financial ratios that every investor should know such as:

• Sortino Ratio
• Tail Ratio
• Stability Ratio

To use these ratios in your notebook we recommend you to use the empyrical library which is very complete and well designed.

# Download empyrical library
!pip install empyrical

II. Sortino Ratio

The Sortino ratio is a risk-adjusted performance measure that evaluates an…