Pine Script Part 10: Quant Performance Analysis & Hedge Fund Backtesting

This chapter covers the quantitative performance metrics required for institutional algo validation.

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1. Sharpe Ratio

Sharpe > 1.5 → good
Sharpe > 2.0 → very strong
Sharpe > 3.0 → elite

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2. Sortino Ratio

Focuses only on negative volatility.
Preferred in professional algo systems.

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3. MAR Ratio

MAR = CAGR / MaxDD

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4. Max Drawdown (MDD)

equity=strategy.equity
peak=ta.highest(equity,5000)
dd=(equity-peak)/peak*100
plot(dd)

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5. CAGR

Measures annualized growth.

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6. R‑Squared (Equity Stability)

R² > 0.8 → stable
R² > 0.9 → excellent

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7. Regime Testing

trendRegime = ta.adx(14) > 20
rangeRegime = ta.adx(14) < 15

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8. Correlation Analysis

cor=ta.correlation(close-ta.ema(close,20), ta.rsi(close,14),200)
plot(cor)

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9. Walk-Forward Analysis

Train → Test → Shift window → Repeat.

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10. Monte‑Carlo Simulation

Used to simulate worst, best, and expected equity paths.

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11. Quant Sample Code

//@version=5
equity=strategy.equity
peak=ta.highest(equity,5000)
dd=(equity-peak)/peak*100
plot(dd)

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12. Premium Benefits

https://sancoqhub.com/go/tradingview

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13. Conclusion

You now understand hedge‑fund level performance validation.
Next: Part 11 – Final: Full Algo Library & All Code Combined