Finance calculations

finance-calcs

Adjusting close.

Dividend multiplier for adjusting close: (Close(T-1) - d)/Close(T-1) where d is the dividend.
Splits adjusting close: Close(T) * 1/N Where N is the split ratio.

Sharpe ratio

Daily return: (new_price - old_price)/old_price
Excess daily return: (daily_return - base_return) e.g. base_return for risk free rate at 4% would be 0.04/252 where 252 is number of trading days.
Sharpe ratio: √252 * average(excess_daily_return) / standard_deviation(excess_daily_return)

Annualized sharpe ratio is √12 * monthly sharpe ratio.

with short hedge

Calculate the short daily return
Net daily return: (daily_return - short_daily_return) / 2 the divide by two is because we have twice the capital in play.

Maximum drawdown

Cumlative compound return per day: (1 + previous_cumulative_compound_return) * (1 + net_daily_return) - 1
High watermark: Maximum(previous_high_water_mark, cumulative_compound_return_of_the_day)
Days draw down: (1 + days_high_water_mark) / (1 + cumulative_compound_return_of_the_day) - 1
Maximum drawdown: Maximum(days_draw_downs)

Drawdown duration

Draw down duration: if day_draw_down = 0 then days_draw_down = 0 else days_draw_down = previous_days_draw_down + 1