Weighted Return Calculator

Weighted Return Formula:

\[ WR = \sum (R_i \times W_i) \]

Weighted Return (WR):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Weighted Return?

Weighted Return (WR) is a measure of the overall return of a portfolio, where each asset's return is multiplied by its respective weight in the portfolio. It provides a more accurate representation of portfolio performance than a simple average.

2. How Does the Calculator Work?

The calculator uses the weighted return formula:

\[ WR = \sum (R_i \times W_i) \]

Where:

\( R_i \) — Return of individual asset (in percentage)
\( W_i \) — Weight of individual asset in the portfolio (as decimal)
\( \sum \) — Summation of all weighted returns

Explanation: The formula calculates the sum of each asset's return multiplied by its portfolio weight, providing the overall portfolio return.

3. Importance of Weighted Return Calculation

Details: Weighted return is crucial for portfolio performance evaluation, investment decision-making, and comparing different investment strategies. It accounts for the relative importance of each investment in the overall portfolio.

4. Using the Calculator

Tips: Enter returns as percentages (comma-separated) and weights as decimals (comma-separated). Ensure both lists have the same number of values. Weights will be normalized if they don't sum to 1.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between weighted and simple average return?
A: Weighted return accounts for the size of each investment, while simple average treats all investments equally regardless of their portfolio weight.

Q2: How should weights be entered?
A: Weights can be entered as decimals (e.g., 0.25 for 25%) or percentages. The calculator will normalize them to sum to 1 if needed.

Q3: Can I use this for negative returns?
A: Yes, the calculator handles both positive and negative returns appropriately.

Q4: What if my weights don't sum to 1?
A: The calculator automatically normalizes the weights by dividing each weight by the total sum of weights.

Q5: How many assets can I calculate for?
A: There's no strict limit, but practical considerations suggest keeping it manageable for accurate input and interpretation.