The statistics I show here at Volatility Made Simple almost always include one of my favorites: the “Ulcer Performance Index” (UPI).
The UPI is like a Sharpe ratio that views risk in terms of the length and severity of drawdowns, rather than in terms of volatility. I show max drawdown as well, but in actuality, I think the stat is overused (and often abused). Loss at a single point in time (max drawdown) is far less important than how a strategy manages losses over time (UPI).
Flirting with Models has a nice write up on the subject that I highly recommend. I particularly liked the “car driving” analogy (and have appropriated it for future use). For those just interested in the math, see Wikipedia.
Note that Flirting with Models is talking about the Ulcer Index (UI), which is simply the denominator in the Ulcer Performance Index (UPI) calculation. In other words…
UPI = [(annualized return – risk free rate) / UI]
(h/t The Whole Street)
Volatility Made Simple