OPEN-SOURCE SCRIPT
Omega Ratio
The Omega Ratio Indicator is a powerful tool designed to measure the risk-adjusted performance of an asset. Unlike traditional measures like the Sharpe or Sortino Ratios, the Omega Ratio considers both the frequency and magnitude of returns above and below a specified target return, providing a more comprehensive view of an asset's performance. This makes it an ideal choice for traders and investors seeking to evaluate the probability of achieving a desired return relative to the risk taken.
Features:
Calculation Period Input: Allows users to specify the period over which the Omega Ratio is calculated, making it flexible and adaptable to various trading strategies and time frames.
Target Return Input: Users can set a specific target return, enabling a customized risk-return analysis based on individual investment goals.
Daily Returns Calculation: The indicator calculates daily returns, which are used to determine the cumulative returns above and below the target return.
Omega Ratio Calculation: By dividing the cumulative returns above the target return by the cumulative returns below it, the indicator provides a clear measure of the likelihood of achieving the target return.
Visual Plot: The Omega Ratio is plotted on the chart, with a reference line at 1, helping users quickly assess whether the asset's returns are favorable relative to the target.
How to Use:
Add the Indicator to Your Chart: Copy the script into the Pine Script editor on TradingView and add it to your chart.
Specify the Calculation Period: Adjust the Calculation Period input to match your desired time frame for the Omega Ratio calculation.
Set the Target Return: Input your desired target return to customize the risk-return analysis.
Interpret the Omega Ratio: An Omega Ratio greater than 1 indicates that the asset's returns are more likely to exceed the target return than to fall short, whereas a ratio less than 1 suggests the opposite.
Features:
Calculation Period Input: Allows users to specify the period over which the Omega Ratio is calculated, making it flexible and adaptable to various trading strategies and time frames.
Target Return Input: Users can set a specific target return, enabling a customized risk-return analysis based on individual investment goals.
Daily Returns Calculation: The indicator calculates daily returns, which are used to determine the cumulative returns above and below the target return.
Omega Ratio Calculation: By dividing the cumulative returns above the target return by the cumulative returns below it, the indicator provides a clear measure of the likelihood of achieving the target return.
Visual Plot: The Omega Ratio is plotted on the chart, with a reference line at 1, helping users quickly assess whether the asset's returns are favorable relative to the target.
How to Use:
Add the Indicator to Your Chart: Copy the script into the Pine Script editor on TradingView and add it to your chart.
Specify the Calculation Period: Adjust the Calculation Period input to match your desired time frame for the Omega Ratio calculation.
Set the Target Return: Input your desired target return to customize the risk-return analysis.
Interpret the Omega Ratio: An Omega Ratio greater than 1 indicates that the asset's returns are more likely to exceed the target return than to fall short, whereas a ratio less than 1 suggests the opposite.
Open-source script
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in publication is governed by House rules. You can favorite it to use it on a chart.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.