Calculate Skewness and Kurtosis

Skewness is the degree of asymmetry observed in the distribution of returns for a trading strategy. Kurtosis measures whether a trading strategy produces results that are heavy-tailed or light-tailed. This section contains links to articles about skewness and kurtosis, as well as an overview of the how traders can use the Tradewell platform to calculate the skewness and kurtosis of their own trading strategies.

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Uncover opportunity — then check for hidden risk

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Profit Table
Generate return data
Build the dataset you need to explore the potential risk inherent your trading strategy
  • Run a backtest of your trading strategy to produce return data
  • The app automatically sends the data from your backtest to the double histogram feature
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Calculate skewness

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Distribution of Returns
Observe data symmetry
Once you've backtested your data, Tradewell can help you easily identify whether the returns of your trading strategy exhibit positive or negative skewness.
  • The skewness for normally distributed returns is zero.
  • Negative values for the skewness indicate data that are skewed left and positive values for the skewness indicate data that are skewed right.
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Calculate kurtosis

Risk-reward visualization
Double Histogram
Identify fat or light tails
Compare the distribution curves of signals and all data to assess relative risk
  • Overlaying signal returns on all data returns helps detect how the risk profile of your trading strategy differs from buying the asset at any given time
  • The green histogram displays the frequency at which the entire data set produces returns of a given size during the backtest simulation
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Start with the free version and then upgrade once you need to run backtests with longer lookback periods or against an expanded set of metrics.

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