What is an Algo Score and how is it calculated?

[Nisshant_Vernekar]

If you’ve browsed through algos on Stratzy, you’ve probably noticed an ‘Algo Score’ displayed right next to each algo.

And one of the most common questions we get is: What exactly is this Algo Score, and how is it calculated?

So here’s the breakdown

Algo Score = Sharpe Ratio × 10

Naturally, the next question is:

What is Sharpe Ratio?

The Sharpe Ratio measures how much return an algo generates relative to the risk it takes.

In simple terms:

Higher returns with lower volatility = Higher Sharpe Ratio

Formula

Sharpe Ratio = (p - f)/s

where:

• p = portfolio or strategy return

• f = risk-free rate

• s = standard deviation of returns (volatility)

A higher Sharpe Ratio generally means the algo is delivering more consistent risk-adjusted returns.

Simple Example

Imagine two algos:

• Algo A generates 20% returns but with large fluctuations.

• Algo B generates 18% returns with much smoother performance.

Even though Algo A gives slightly higher returns, Algo B may have a better Sharpe Ratio because its returns are more consistent and less volatile.

That means Algo B could end up having a higher Algo Score.

Important Note

Algo Scores are dynamic and keep changing based on:

• Market conditions

• Algo performance

• Changes in volatility

So it’s always a good idea to keep checking the latest score.

Let us know what other metrics you’d like us to explain next

[M_P_Patil]

How to observe sharpe ratio or algo score while selecting or continue using algo , like what’s a safe limit let’s assume like if algo score falls below 15 we may need to monitor algo carefully

[Shiv_Kumar]

If possible, could we implement automated alerts for end users to notify them of any significant falls or upward movements in the score?
Additionally, it would be very helpful if the system could provide an alert when a user selects an algo that may not be suitable for the current market conditions. Specifically, if a selection is made that does not align with the current market state, a notification could appear suggesting that the selection may not be correct.

[Nisshant_Vernekar]

So the algo score keeps on changing according to the trade(s) it takes. But 1-2 trades don’t really affect the score that much. But yes, you have to keep on checking if the algo score has changed by a lot @M_P_Patil

[Nisshant_Vernekar]

@Shiv_Kumar Sure, yes. These things can be considered. Let us understand internally if this is compliant with SEBI first. Thanks for the suggestion!

[greenback_trader]

So is this Algo Score out of 10, 20, 50? What is the maximum an Algo Score can be?

[nissh123]

@greenback_trader It depends on the sharpe ratio right, can be anything. More the better.