Risk/Reward Ratio Quantifier

## Risk/Reward Ratio Quantifier

**Stock**: {COMPANY} ({TICKER})
**Current Price**: $___ | **Investment Horizon**: ___ months

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**STEP 1 — THREE-SCENARIO MODEL**

| Scenario | Description | Price Target | Return | Probability |
|---|---|---|---|---|
| Bull     | ___          | $___         | ___%   | ___%        |
| Base     | ___          | $___         | ___%   | ___%        |
| Bear     | ___          | $___         | ___%   | ___%        |
| **Total probability** | | | | **100%** |

**Probability-Weighted Expected Return (EV)**:
EV = (Bull return × Bull prob) + (Base return × Base prob) + (Bear return × Bear prob)
EV = (___% × ___) + (___% × ___) + (___% × ___) = **___%**

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**STEP 2 — DOWNSIDE ANALYSIS**
- Bear case price: $___ | Bear case loss: ___%
- Maximum drawdown estimate (technical support / fundamental floor): $___
- Expected max drawdown %: ___%
- Time to recover from bear case (estimated): ___ months

**Risk/Reward Ratio** = Bull case upside / Bear case downside
= ___% / ___% = **___:1**
(>2:1 = attractive; >3:1 = compelling)

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**STEP 3 — SHARPE-EQUIVALENT**
Annualized EV: ___% | Risk-free rate: ___% | Annualized std dev (bear-to-bull range / 4): ___%

Sharpe-equivalent = (EV – Risk-free rate) / Std dev = ___
(>0.5 = adequate; >1.0 = strong)

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**STEP 4 — KELLY CRITERION (optional)**
Kelly % = (p × b – q) / b
- p = probability of gain (bull + base probability if both are positive): ___
- q = probability of loss: ___
- b = average gain / average loss ratio: ___

Kelly % = ___ → Recommended position: ___% of portfolio
**Half-Kelly (more conservative)**: ___% of portfolio

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**VERDICT**
- Risk/reward ratio: ___:1
- Probability-weighted EV: ___%
- Sharpe-equivalent: ___
- **Action**: Strong Buy (R/R >3:1) / Buy (R/R 2–3:1) / Hold (R/R 1–2:1) / Avoid (R/R <1:1)
- **Suggested position size**: ___% (half-Kelly)