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Sharpe Ratio
Sharpe Ratio
Image 1 A ratio developed by Bill Sharpe that is calculated by dividing the rate of return for a portfolio that is above the risk free rate (T-Bill rate) and dividing it by the standard deviation of the returns.
Image 2 It tells us whether the returns of the portfolio were because of smart investment decisions or by excess risk. The Sortino Ratio is a variation of this.


Portfolio

Risk

Sortino Ratio

Standard Deviation

T-Bill