Rachev Ratio – The ratio of the ETR to the ETL. The Rachev Ratio demonstrates the fund’s upside potential as measured by expected return in the right tail and expected loss in the left. This measure is similar to the Omega Ratio but is data adaptive because the confidence level is user defined (how far out into the tails to go).
Investors who are required to select and monitor investment managers should develop a basic understanding of investment statistics. Quantitative tools can provide you with good insight that you can use in your qualitative interviews with managers and when monitoring your investments.