Signal Flow Data Dictionary

Calmar Ratio

Definition: The Calmar Ratio measures return relative to risk, specifically the risk of the largest loss.

Formula:
Calmar Ratio = Average Annual Return / Maximum Drawdown

Example:
If an investment has a 15% average return and a max drawdown of 10%:
Calmar Ratio = 15% / 10% = 1.5

A higher Calmar Ratio means better risk-adjusted performance.

Max Drawdown

Definition: The largest drop from a peak to a trough in value before a new peak is reached.

Peak ➚       $100
           ↘
            ↘
             ➘  $70 ← Trough
Drawdown = (100 - 70) / 100 = 30%
  

Shows how much an investor could lose during the worst period.

Max Drawdown Duration

Definition: The longest time it takes an investment to recover from a drawdown.

Example:
Drawdown began: January 2022
Recovery completed: June 2023
Duration = 18 months

Helps understand how long you might wait during a bad period.

Momentum

Definition: Measures how strongly an asset is trending up or down.

Example:
- Stock A rose 20% over 3 months → Strong momentum
- Stock B stayed flat → Weak momentum

Momentum investors seek assets with continued strength in recent price movement.

Profit Factor

Definition: The ratio of total profits to total losses.

Formula:
Profit Factor = Total Profits / Total Losses

Example:
Profit = $10,000, Losses = $5,000
Profit Factor = 2.0

Above 1.0 means profitable strategy.

Relative Strength

Definition: Compares asset performance to another (like the S&P 500).

Example:
Stock A gained 10%, S&P 500 gained 5%:
Relative Strength = 10% / 5% = 2.0

Above 1 means outperforming benchmark.

Sharpe Ratio

Definition: Measures how much return you're getting per unit of risk (volatility).

Formula:
Sharpe Ratio = (Average Return - Risk-Free Rate) / Standard Deviation

Example:
Avg Return = 12%, Risk-Free = 2%, Std Dev = 10%
Sharpe = (12 - 2) / 10 = 1.0

Higher Sharpe = better risk-adjusted returns.

Simple Return

Definition: Basic percentage change in value from start to finish.

Formula:
Simple Return = (End Value - Start Value) / Start Value

Example:
Buy at $100, sell at $120:
(120 - 100) / 100 = 20%

Sortino Ratio

Definition: Like Sharpe, but only considers downside risk.

Formula:
Sortino Ratio = (Average Return - Risk-Free Rate) / Downside Deviation

Useful for avoiding punishment of upside volatility.

Win Rate

Definition: Percentage of trades that were profitable.

Formula:
Win Rate = (# of Winning Trades) / (Total Trades)

Example:
60 winning trades out of 100 → Win Rate = 60%

High win rate is good, but should be considered along with average gain/loss.