What is Sharpe Ratio?
Risk ManagementIntermediate
The Sharpe ratio measures risk-adjusted return by dividing excess return (above the risk-free rate) by volatility. A Sharpe ratio above 1.0 is good; above 2.0 is very good; above 3.0 is excellent. It helps compare strategies that have different levels of risk.
Related terms: Sortino Ratio Risk-Adjusted Return Volatility