We made three improvements to the Sharpe Ratio calculation and the Leaderboard:

  • (1) For the Global leaderboard Sharpe Ratio will be using historical values from a standardized period of 30 days, but can also be viewed by week, three months, or year.
  • (2) Portfolios will need to earn the eligibility to have Sharpe Ratio calculated.

Let's walk through each of these improvements:

(1) Default Standardized period of 30 days

  • Prior to this change: The period where the portfolio values are considered for the Sharpe Ratio calculation is from the beginning of the portfolio till today.
  • Now: The default period is the last 30 days.

    Hence, the default period is standardized for all portfolios, for ease of comparison.  For example, market crashed in October 2018.  If Portfolio A was created in prior to the crash, it would likely to be negatively affected by the crash, whereas a portfolio created on March 2019 will not be affected by the crash.

    With the standardized default period, only the past 30 days will be considered for every portfolio. Or you can view the Sharpe Ratio of all portfolios of the other periods mentioned above.

(2) Sharpe Ratio eligibility requirements

  • Prior to this change: 3 days have to elapse before Sharpe Ratio will be calculated.
  • Now:
    Sharpe Ratio should only be applied to risky enough portfolios, i.e., with large enough volatility. Here we define risky enough as having volatility greater than the volatility of the 3-month US Treasury Bond.
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