Omega Ratio Pass Node
Omega Ratio — Series Input
Overview
The Omega Ratio Pass Node computes the rolling Omega ratio — the probability-weighted ratio of gains above a threshold (τ) to losses below it. Unlike Sharpe, Omega uses the full return distribution without assuming normality.
An Omega ratio > 1 means gains above τ outweigh losses below it. It is particularly useful for evaluating strategies with skewed or fat-tailed return distributions.
Formula
Parameters
| Parameter | Default | Description |
|---|---|---|
| period | 20 | Rolling window in bars |
| threshold | 0 | τ — Minimum Acceptable Return (MAR). Returns above this are gains; below are losses. |
Inputs & Outputs
| Slot | Direction | Type | Description |
|---|---|---|---|
| input | Input | { values, timestamps } | Returns series |
| values | Output | (number | null)[] | Omega ratio per bar; nulls during warm-up or when no losses below τ |
| timestamps | Output | number[] | Unix timestamps aligned to input |
Use Cases
Non-Normal Return Analysis
Omega is ideal when returns are skewed or have fat tails — it does not assume a Gaussian distribution like Sharpe does.
Threshold-Based Evaluation
Set threshold to your hurdle rate (e.g. 0.001 = 0.1% daily) to measure how often the strategy clears that bar.
Strategy Comparison
Compare two strategies on the same Omega ratio — the one with higher Omega produces more gain relative to loss per threshold.
Tips & Best Practices
Omega > 1 Is Positive
Ω = 1 means gains exactly balance losses at threshold. Ω = 2 means double the gain magnitude above threshold vs below it.
Complement to Sharpe
Use Omega alongside Sharpe: a strategy with moderate Sharpe but high Omega has good gains relative to downside even if total volatility is moderate.
Null When All Returns Above τ
If all window returns exceed τ (denominator = 0), Omega is undefined. This is actually a good sign — handle null as infinitely good Omega.