Strategy Evaluation Index
Overview
In quantitative strategy backtesting research, it is often necessary to objectively and comprehensively analyze the feasibility of the strategy through risk evaluation indicators from various angles. Therefore, it is necessary to have a certain understanding of common indicators.
Earning indicators
Backtest yield
(Final value-initial value) / initial value
Annualized rate of return
We pay more attention to the annualized rate of return. For stocks, an annualized rate of 15~30% is already a better strategy. Of course, the higher the annualized rate of return, the better.
Benchmark rate of return
Under the same conditions, the yield of a simple buy and hold contract strategy (the default benchmark contract is 300 shares in Shanghai and Shenzhen, assuming that the index is tradable, and the minimum trading unit is 1)
Risk indicators
Risk indicators refer to the value of taking some risk when gaining benefits.
Maximum drawdown
The maximum retracement rate refers to the maximum value of the return rate retracement range when the net value of the product reaches the lowest point at any historical point in the selected period. The maximum retracement is used to describe what may occur after buying the product Worst case scenario. The maximum drawdown is an important risk indicator. For hedge funds and quantitative strategy trading, this indicator is more important than volatility.
Note: The maximum drawdown is as small as possible, and the maximum drawdown is best maintained at 10~ 30% ago.
Unit risk return index
Sharpe ratio
Sharpe ratio: The larger the Sharpe ratio, the higher the risk return obtained by the unit risk. Achieving 1.5 or more is a good result.