K-Ratio is a measurement of the straightness of the equity curve or how
well the equity curve fits its own linear regression if you will. For
compounding systems the measurement would be the straightness on a log
scale. (See Attached)
UI = Ulcer Index. A measurement of downside volatility. The smaller
this value is, the less investment ulcers one will have. It is the
square root of the average of the squared retracements. One may think
of it as the bottom half of the standard deviation. It does not
penalize for upward volatility as does the standard deviation.
UPI = Ulcer performance Index. The greater this number the greater the
reward per unit of downside risk. It is calculated by subtracting 5.4%
from the annualized return to bring that return to the amount above
risk free Treasury Notes over along period of time. The resultant is
then divided by the Ulcer Index.
I also attached two charts of systems that I trade, the first of which
makes infrequent trades and therefore by its nature must suffer more of
the ups and downs then the second which is a frequent trader.
Fred
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