All volatility metrics are calculated:
for day-traders to show short-term intraday volatility
for investors to show long-term volatility
For the detailed description of the difference between short- and long-term calculations see section Investment horizon.
BTC-fiat (including USDT) pairs are based on the USD denominated Aggregated price; ALT-fiat, ALT-BTC, ALT-ETH pairs are based on the BTC Aggregated price.
The volatility metrics are calculated per coin, not per currency pair (symbol).
A metric is displayed on the website only if at least 33% of all observations within a selected period are available.
The risk scoring gives a single value with the coloured circle of the risk of an asset or symbol:
Green circle means low risk
Orange circle means medium risk
Red circle means high risk
The resulting metric values are then compared with the metric value for MG50:
Those assets that have values 2+ times lower than that of MG50 are low volatility (risk) assets
Those assets that have values 1.5+ times higher than that of MG50 are high volatility assets
All the rest should be considered mid-volatility assets
Metric | Description | Meaning |
Value-at-risk | VaR, also named expected loss, measures the amount of potential loss (with a certain degree of confidence) that could happen in an investment over a given time period. | Higher value means higher risk |
Standard deviation of returns | Standard deviation is a metric to estimate the extent by which a return varies from its mean | Higher value means higher risk |
Best historical return | Largest positive return for the selected interval within the period | Higher value means higher risk |
Worst historical return | Largest negative return for the selected interval within the latest period | Higher value means higher risk |
Maximum drawdown | A maximum drawdown is the maximum loss from a peak to a trough of an asset price, before a new peak is attained | Higher value means higher risk |
Periods with extreme returns | Share of returns for the selected interval within the period exceeding critical value | Higher value means higher risk |
Sharpe ratio | The average return for the selected interval, which is calculated within the period, earned in excess of the risk-free rate per unit of volatility or total risk | Higher value means higher return per unit of risk |
The formulas of the selected metrics are shown below.
Value-at-Risk
We calculate 95% VaR over the specified period based on the historical returns for the interval. E.g., for a long-term investor VaR shows a maximum expected daily loss of investment based on 15-minute returns with the 95% confidence (it means there are 5 cases out of 100 when the loss will exceed this value).
where:
X is a return for the interval
F is the cumulative distribution function of X
α is 5% in our case
Standard deviation of returns:
where:
x is a return for the interval (e.g., 15-minute or daily return)
x̄ is an average return over the selected period (e.g., 1 day of 3 months)
N is the number of periods within a period
Maximum drawdown:
where:
T is the end of the period
t is the time of the peak, i.e. highest price within the period
τ is the time of the lowest price within the period after the peak
Sharpe ratio:
where:
r is ex-post average return of an asset
rf is a risk-free rate that we assume equals 0
σ is standard deviation of returns of an asset over the period