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Back to Glossary
Risk ManagementS

Sharpe Ratio

A measure of risk-adjusted return. Calculated by subtracting the risk-free rate from the return and dividing by the standard deviation. Higher is better.

Example

“The fund's Sharpe Ratio of 1.8 indicated strong risk-adjusted performance, generating significantly more return per unit of risk compared to the benchmark's ratio of 0.9.”

Related Terms

Sortino RatioRisk-Adjusted ReturnStandard Deviation