K-Ratio
Candlefocus EditorK-Ratio measures the risk-adjusted returns of a security, by measuring the return/standard deviation of a securities’ return. The ratio gives more weight to higher returns versus lower ones and can therefore help investors pick out better performing stocks. A higher K-Ratio value indicates that the stock has been more likely to generate higher returns compared to its peers; whilst a lower K-Ratio value indicates the stock has been more likely to generate lower returns compared to its peers.
In terms of deciding which stock is the better investment, investors take into account not only the performance of the stock, but also the volatility of the stock as well. It is for this reason that investors use K-Ratios to gauge how much risk is involved in investing in an equity. The lower the ratio, the lower the expected risk with the security.
K-Ratios are sometimes used with other financial ratios to better assess stock performance. For example, it may be used in conjunction with price-to-earnings ratio to get a better understanding of the overall financial health of a company.
In conclusion, K-Ratio is an invaluable tool for investors who are looking to invest in stocks. It gives investors a comprehensive evaluation of the stock’s performance over time and helps them to determine which stocks offer a better return compared to its peers. The ratio also measures the volatility of a stock to help investors better judge the risk involved in investing in a security.