Monthly Returns represent the percentage change in the value of an investment or portfolio over a one-month period. This metric provides a standardized measure of performance, enabling investors to assess the short-term profitability or loss generated by their digital assets or trading strategies within the crypto market. It serves as a fundamental component for performance analysis and risk assessment.
Mechanism
Calculation of monthly returns involves determining the asset’s or portfolio’s value at the close of one calendar month and comparing it to its value at the close of the preceding month, adjusting for any capital additions or withdrawals. The formula typically divides the current period’s value change by the initial value, expressing the result as a percentage. For crypto assets, this requires accurate pricing data from exchanges and precise timestamping of valuations to account for continuous, 24/7 trading.
Methodology
The strategic use of monthly returns extends to evaluating investment strategy efficacy, comparing performance against benchmarks, and informing portfolio adjustments. A consistent track record of positive monthly returns indicates effective asset allocation or trading decisions. Analyzing these returns in conjunction with volatility and drawdown metrics helps in understanding risk-adjusted performance, providing insights into a crypto investment’s stability and potential for sustained growth over intermediate timeframes.
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