What is meant by risk adjusted return?
Written by Wilfred Ling Tuesday, 18 June 2013These are some charts to explain what is meant by risk adjusted return.
In the chart below, this particular fund’s rolling 3 years total return is compared to its benchmark which is MSCI AC Asia Pacific ex Japan. The comparison is converted to SGD. In all periods considered, the fund did better or similar to its benchmark.
In the following chart is the equivalent rolling 3 years monthly annualized volatility. As it can be seen that the fund’s volatility is always lower than the benchmark. Therefore, pictorially the fund has a better risk adjusted return compared to its benchmark. In other words, you get similar or better returns at a lower risk. There is a saying that a picture says a thousand words.
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In the following chart is the equivalent rolling 3 years monthly annualized volatility. As it can be seen that the fund’s volatility is always lower than the benchmark. Therefore, pictorially the fund has a better risk adjusted return compared to its benchmark. In other words, you get similar or better returns at a lower risk. There is a saying that a picture says a thousand words.
If you are keen in learning more about investments, do come ...
