Calculating Financial Statistics

Lesson 1 of 1

- 1In 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 *…
- 2Now 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… - 3Another 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… - 4When 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…
- 5Now, 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…
- 6Although 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… - 7Now 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…
- 8Although 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. …
- 9Another 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… - 10Now 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…
- 11Congratulations on reaching the end! In this lesson, we learned to calculate and understand the rate of return of an investment:
**Simple Rate of Return*

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