Return-to- Risk Ratio

Return-to- Risk Ratio = Return / sd

Defined as where Return is a profit of an investment (change of value)

sd is the standard deviation of the sample

For example:

Expected return for company = 25% & Standard Deviation = 12.5

Return-to-Risk Ratio = 2 = 25/12.5

The Unit of the measurements can affect the mean and standard deviation.

To get a measurement of dispersion which is independent of the units of measurement use Coeffcient of Variation (CV) - CV = sd/mean

Coeffcient of Variation is the inverse of Return-to-Risk Ratio

For Example:

	Created by dilraj kaur over 6 years ago

Business Analytics Note on Lecture 1, created by dilraj kaur on 26/03/2018.

Lecture 1