Calculating Financial Statistics
Lesson 1 of 1
  1. 1
    In this lesson, we will be learning how to use Python to calculate key financial statistics for making informed decisions about investments. There are many different kinds of financial assets, or *…
  2. 2
    Now that we are familiar with how the rate of return is usually expressed, let’s take a look at calculating it. The most basic type of return is the simple rate of return. It is defined as the d…
  3. 3
    Another type of return is the logarithmic rate of return, also known as the continuously compounded return. This is the expected return for an investment where the earnings are assumed to be cont…
  4. 4
    When describing the rate of return of an investment, something that is important to keep in mind is the time frame of the investment. For example, an investment with a 2% rate of return over one da…
  5. 5
    Now, let’s look at an extension of the previous conversion formula. Suppose we know the log rate of return for 5 days of a given year. Which daily log return would we use to calculate the annual re…
  6. 6
    Although we will be focusing primarily on individual assets in this lesson, it is important to recognize that these investments often make up the pieces of a larger financial portfolio. Portfolio…
  7. 7
    Now that we have a good understanding of rate of return, let’s shift our focus to assessing the risk involved in an investment. One of the key statistics for understanding risk is variance. *Varian…
  8. 8
    Although the variance is useful in determining the relative risk of an investment, it is sometimes not the easiest statistic to interpret since it does not have the same unit as the original data. …
  9. 9
    Another important statistic for assessing risk is the correlation between the returns of two assets. Correlation is a measure of how closely two datasets are associated with each other. It is oft…
  10. 10
    Now that we have a good understanding of what correlation is and how to use it to assess the risk in an investment, let’s take a closer look at how the correlation coefficient is calculated. Belo…
  11. 11
    Congratulations on reaching the end! In this lesson, we learned to calculate and understand the rate of return of an investment: *Simple Rate of Return – advantageous for aggregating over a…

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