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Ratio Trading

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Filter:Ratio Trading

Category – Ratio Trading

Ratio trading is a strategy that involves analyzing the relationship between two or more correlated assets, using their price ratios to identify trading opportunities. In trading, ratio trading helps traders identify when an asset is undervalued or overvalued relative to another asset. For example, traders might use the price ratio of two stocks in the same sector to determine which is the better buy or sell. The strategy relies heavily on technical analysis and can be used in various markets like equities, forex, and commodities.

PRICE-TO-SALES RATIO (P/S RATIO)

Price-to-Sales Ratio compares a company's market value to its revenue, assessing its valuation relative to sales performance.

PRICE-TO-BOOK RATIO (P/B RATIO)

Price-to-Book Ratio compares a company's market value to its book value, assessing whether a stock is over- or undervalued.

INTEREST COVERAGE RATIO

Interest Coverage Ratio measures a company’s ability to cover interest expenses using EBIT, highlighting financial resilience.

CURRENT RATIO

Current Ratio measures a company’s ability to cover liabilities with assets, indicating liquidity and financial stability.

CALMAR RATIO

Calmar Ratio measures risk-adjusted return by comparing the annualized return to the maximum drawdown, providing insights into performance relative to worst-case losses. A higher Calmar Ratio indicates better performance relative to risk.

SORTINO RATIO

Sortino Ratio measures risk-adjusted return by focusing on downside risk, comparing returns above a target or risk-free rate to the volatility of negative returns.

SHARPE RATIO

Sharpe Ratio measures risk-adjusted return, reflecting the excess return earned per unit of risk taken, relative to the risk-free rate.

RISK-REWARD RATIO

Risk-Reward Ratio compares the monetary risk to potential reward for a trade, transaction, or portfolio. It evaluates profitability relative to risk, helping traders optimize decision-making and strategy development.

CASH RETENTION RATIO

Cash Retention Ratio measures the percentage of the account's initial balance still available as total cash. It reflects the trader's ability to preserve liquidity relative to their starting capital, aiding in financial performance analysis.