A portfolio manager makes multiple decisions when managing capital, such as picking which securities to invest in, which geographies to allocate to, how to size each position, and how long to hold each position in the portfolio. All of these decisions impact returns and are a great window into a manager’s true investment acumen.
The win/loss ratio is a metric that helps quantify the efficacy of two critical decisions for managers: the sizing of trades and the timing of exits out of trades. In layman’s terms the win/loss ratio measures (on average) how much a manager makes when they’re right versus how much they lose when they’re wrong.
In this guide, we’ll focus on some basic observations and properties of the win/loss ratio. Download our latest guide for the most authoritative walkthrough of win/loss ratio and its applications.
What does the guide cover?
- How win/loss ratio is calculated
- why it helps evaluate a portfolio
- ways to improve win/loss ratio
- how win/loss ratio relates to batting average