Risk-adjusted return

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Risk-adjusted return

Often we subtract from the rate of return on an asset a rate of return from another asset that has similar risk. This gives an abnormal rate of return that shows how the asset performed over and above a benchmark asset with the same risk. We can also use the beta of the asset multiplied by the benchmark return to create a hypothetical asset that has the same risk characteristics. The difference between the asset return and the beta times the benchmark is the risk adjusted return and is also known as the alpha.

Risk-Adjusted Return

The return on an asset or investment relative to the return on assets and investments with similar risk. The risk-adjusted return can help an investor determine whether he/she is extracting the highest possible return for the least possible risk. One way to calculate the risk-adjusted return is to take the Sharpe ratio.
References in periodicals archive ?
In our case we manage our reserves in such a way as to insure safety, liquidity, and risk adjusted returns.
Carry Trade Survival Kit In this report, we argue that carry traders can increase their risk adjusted returns by tracking the levels of three different inter-market indicators: FX implied volatility, options risk reversals and interest rate expectations.
Going forward, we will continue choosing our transactions selectively, both on the debt and equity side, while seeking appropriate risk adjusted returns.
The addition of Bill will further enable us to address the investment needs of our institutional clients and develop investment products that we believe will be successful in delivering superior risk adjusted returns in varying interest rate environments," said Robert Caruso, Managing Partner and Chief Operating Officer, Highbridge Capital Management.
Hudson is willing to structure transactions in a variety of different ways in order to achieve appropriate risk adjusted returns.
American's Managing Director of Portfolio Management, Scott Darling commented: "Core real estate offers investors numerous benefits including strong cash yields, a hedge against future inflation and high risk adjusted returns, and certainly not least of all, diversification.
The borrower acquires properties providing superior risk adjusted returns.
Hong Kong, with one of the region's most sophisticated bases of investors, is demanding access to hedge funds that will deliver risk adjusted returns," said Bill Kwok, Director of Wing On and Managing Director of Wocom.
At present, for example, the company is participating in a number of competitive sales and privately negotiated transactions which are expected to provide investors with substantial and attractive risk adjusted returns," Hedges said.
As of January 31, 2000 the Fund was currently ranked number 3 in its category on the Select List(R) which is comprised of fifteen international funds that have demonstrated good long term performance in terms of risk adjusted returns, not simply the highest returns.
Fortress seeks to produce attractive risk adjusted returns through a disciplined investment process that focuses on undervalued and distressed real estate related assets.

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