Portfolio
What is Sharpe Ratio?
The Sharpe ratio measures return earned per unit of risk, helping you compare whether a portfolio's returns justify the volatility taken to achieve them.
Formula
Sharpe Ratio = (Portfolio Return - Risk-Free Rate) ÷ Portfolio Standard Deviation
How to Interpret
Higher is better. Above 1.0 is acceptable, above 2.0 is very good, above 3.0 is excellent. Compare across portfolios to find the best risk-adjusted return.
Typical Ranges
Above 1.0 acceptable, above 2.0 very good, above 3.0 excellent.