Information Ratio

Problem

Compute the information ratio as mean(active) / std(active), where active[t] = portfolio[t] - benchmark[t] and std is the population standard deviation.

Return 0.0 when the lists are empty, differ in length, or the active return has zero standard deviation.

Hint

It measures active return per unit of active risk.

Test cases

case 1

in: [[0.02,0.03,0.01],[0.01,0.01,0]]

expected: 2.8284271247461903

case 2

in: [[0.05,0.05],[0.02,0.02]]

expected: 0

case 3

in: [[0.01,-0.01],[0,0]]

expected: 0

case 4

in: [[],[]]

expected: 0

Starter codePython

def information_ratio(portfolio, benchmark):
    # Your code here
    pass

4 test cases · run your code against them in the editor