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Market Composite Index based on the Sharpe Ratio

by QuantShare, 3189 days ago
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This market index calculates the average Sharpe ratio of all stocks in a specific market. The Sharpe ratio is obtained using the "sharpe" function and it is computed for a period 90 trading days.

The higher the market index value the better it is; this indicates that more stocks have higher Sharpe ratio (Good return per unit of risk).

This composite can be used as a market-timing rule in any trading strategy (Ex: Allow entering long positions if the average Sharpe ratio of all stocks is higher than 0).

You can see it in action here: Trading Strategy based on the Sharpe Ratio Metric; in this trading strategy, the average Sharpe ratio was calculated dynamically using the "Comp" function, which is a powerful function that returns the average, sum, max, min... of any time-series for all ticker symbols. Indices you create using the composite plug-in can be implemented dynamically using the "Comp" function when performing screening, rules analysis and backtesting.
By adding this market-timing rule to the above strategy, its overall performance greatly improved (more return and less risk - lower drawdown).

You can create several variations of this composite by modifying the period or number of bars used to calculate the Sharpe ratio of each individual stock. This can be done by updating the item and changing the value of the variable "period1".

Only stocks with a price above $2 are included in this composite.


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Type: Composite Index

Object ID: 914


Country:
All

Market: Stock Market

Style:
Technical Analysis

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Technical Analysis


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