Sharpe Ratio
Sharpe Ratio is a measure developed by William F. Sharpe to measure risk-adjusted performance of one company. It embraces standard deviation and excess returns, and is calculated by subtracting risk free rate of a portfolio from its total rate of return and dividing the result with portfolio standard deviation.
Sharpe ratio is created in order to tell us on which basis a portfolio returns are absorbed, on either high-risk basis or creative investment decisions basis.
The greater the Sharp ratio, the better the company's historical risk-adjusted performance.
| Related Terms: Treynor Ratio |