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 ?
We will also continue to optimise and strengthen the bank's foundation by improving balance sheet efficiency with better risk adjusted return loans, liquidity management, and mitigating credit risk,' it said.
Absolute returns to farmland have shown two valuable qualities - high absolute returns with low return volatility, giving farmland a favorable risk adjusted return profile.
The rank is an outcome of an objective and comparative analysis against various parameters, including: risk adjusted return, fund size, company concentration and portfolio turnover.
"With specific regards to the Carson City investment, we were impressed with the quality of asset and sponsorship, and, after extensive diligence on the market and asset level economics, we felt this investment offered a very favorable risk adjusted return."
This is attributed to clear strategy and business model focused on identifying unique investment opportunities that yield high risk adjusted return to investors.
Risk adjusted return on capital (RAROC)--a measure of profitability of a business activity based on whether its return on capital is above or below its equity hurdle rate--is 20 percent.
Based on JCR-VIS risk adjusted return model, performance of funds under management ranked ahead of peers in the ongoing year.
* To develop meaningful risk adjusted return targets, which can be used to assess various strategic options as well as impact goals and incentives.
Michael Maturo, Reckson's executive vice president and chief financial officer, noted, "The One Court Square investment provides us with a very competitive risk adjusted return.
We will continue to seize any opportunity that we deem is offering the appropriate risk adjusted return, whether in condos, industrial, residential, retail, senior living or land.
Faysal Income & Growth Fund (FIGF) is to provide superior long-term risk adjusted returns by investing in a diverse pool of fixed income securities, including money market instruments; in particular, the aim is to minimize interest rate risk through duration management and default risk through portfolio diversification.
Through diligent investment selection and an emphasis on quality over quantity, we remain focused on capital preservation and generating attractive risk adjusted returns, and on our primary goals of growing net asset value over time and delivering stable dividends to our shareholders."

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