Sharpe Ratio
technicalThe Sharpe ratio measures risk-adjusted return by comparing the excess return of an investment (above the risk-free rate) to its standard deviation (volatility). A higher Sharpe ratio indicates better risk-adjusted performance. A Sharpe ratio above 1.0 is generally considered acceptable, above 2.0 is very good, and above 3.0 is excellent. It was developed by Nobel laureate William Sharpe.
Related Terms
See this concept in action → ETF Comparison