ETF Risk

Log return

r_{t} = \ln (\frac{P_{t}}{P_{t - 1}})

Standard Deviation

σ = \sqrt{\frac{1}{N - 1} \sum_{i = 1} {(r_{i} - \bar{r})}^{2}}

Annualized Volatility from Standard Deviation

σ_{annual} = (σ_{weekly} \times \sqrt{52})

SRRI (Synthetic Risk and Reward Indicator)

Description

The SRRI is a standardized risk indicator defined by the UCITS regulatory framework (CESR/ESMA), used across European fund factsheets. It reflects the fund’s historical volatility and provides a score from 1 to 7, where:

1 = Lowest risk (low volatility)

7 = Highest risk (high volatility)

The score is calculated based on the annualized standard deviation of the fund’s weekly returns over the past 5 years, and is mapped into predefined risk bands.

SRRI Formula (Based on Volatility) SRRI

SRRI = ((σ_{annual}))

SRRI	Annual Volatility (%)
1	0 – 0.5
2	0.5 – 2
3	2 – 5
4	5 – 10
5	10 – 15
6	15 – 25
7	> 25

Example

If a fund has an annualized volatility of 13.2%, then: SRRI=5 (because it falls in the 10–15% band)