Risk Adjusted Return
Risk-adjusted return evaluates performance after accounting for volatility and downside exposure.
Why It Matters
- Two portfolios with similar return can have very different risk efficiency.
- Sharpe and related metrics help normalize return by risk taken.
- Risk-adjusted views improve allocation and rebalancing decisions.
How to Improve It
- Lower concentration and correlation cluster exposure.
- Reduce volatility drag through diversified sleeves.
- Use optimization to improve return efficiency under constraints.