Sharpe Ratio

In a sentence

The analyst used the Sharpe ratio to compare each fund's return relative to its volatility.

• The analyst used the Sharpe ratio to compare each fund's return relative to its volatility.
• A higher Sharpe ratio may indicate better risk-adjusted performance.
• The portfolio's Sharpe ratio fell after returns became more volatile.
• Investors should compare Sharpe ratios calculated over similar periods and with consistent assumptions.
• The strategy delivered a lower absolute return but a stronger Sharpe ratio than its benchmark.