Beginner
Practice Drills: Calculating Sharpe Ratio and Drawdown by Hand and in Python
A focused set of practice drills for two of the most-used risk metrics in systematic trading: Sharpe ratio and maximum drawdown. Each metric is worked out by hand first, from raw daily returns, so the formula stops being a black box. Then the same calculation is reproduced in Python using numpy and pandas, so you can check your hand-worked answer against code and start building the habit of verifying a metric both ways.
Sharpe RatioMaximum DrawdownRisk-Adjusted ReturnsPython for Finance
MODULES
5
DURATION
4 Hours
TRACK
Quantitative Finance
What You'll Master
What Sharpe ratio and maximum drawdown actually measure, and why raw returns alone are misleading
How to calculate Sharpe ratio by hand from a series of daily returns, including annualizing it correctly
How to reproduce the same Sharpe ratio calculation in Python using numpy and pandas
How to identify and calculate maximum drawdown by hand from a price series
How to calculate maximum drawdown in Python and interpret it alongside Sharpe ratio
Access Level
LEARNER
Everything included
Full Text Playbooks
Actionable Exercises
Mobile Reading Mode
Lifetime Updates