[{"data":1,"prerenderedAt":610},["ShallowReactive",2],{"term:sharpe-ratio":3},{"term":4,"related":597},{"id":5,"title":6,"body":7,"category":579,"description":580,"extension":581,"faq":582,"meta":583,"navigation":584,"path":585,"related":586,"seo":590,"stem":591,"takeaways":592,"__hash__":596},"terms\u002Fterms\u002Fsharpe-ratio.md","Sharpe Ratio",{"type":8,"value":9,"toc":573},"minimark",[10,15,19,22,26,355],[11,12,14],"h2",{"id":13},"understanding-sharpe-ratio","Understanding Sharpe Ratio",[16,17,18],"p",{},"The Sharpe ratio subtracts the risk-free rate from a portfolio's return and divides by the portfolio's volatility. It lets you compare investments that took different amounts of risk.",[16,20,21],{},"A higher Sharpe ratio means better risk-adjusted performance. 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",[27,359,361,379],{"className":360},[34],[27,362,364],{"className":363},[38],[40,365,366],{"xmlns":42},[45,367,368,376],{},[48,369,370],{},[64,371,372,374],{},[67,373,69],{},[67,375,16],{},[90,377,378],{"encoding":92},"R_p",[27,380,382],{"className":381,"ariaHidden":98},[97],[27,383,385,389],{"className":384},[102],[27,386],{"className":387,"style":388},[106],"height:0.9694em;vertical-align:-0.2861em;",[27,390,392,395],{"className":391},[111],[27,393,69],{"className":394,"style":250},[111,177],[27,396,398],{"className":397},[182],[27,399,401,421],{"className":400},[149,150],[27,402,404,418],{"className":403},[154],[27,405,407],{"className":406,"style":192},[158],[27,408,409,412],{"style":265},[27,410],{"className":411,"style":199},[166],[27,413,415],{"className":414},[203,204,205,206],[27,416,16],{"className":417},[111,177,206],[27,419,214],{"className":420},[213],[27,422,424],{"className":423},[154],[27,425,427],{"className":426,"style":221},[158],[27,428],{}," is the portfolio return, ",[27,431,433,451],{"className":432},[34],[27,434,436],{"className":435},[38],[40,437,438],{"xmlns":42},[45,439,440,448],{},[48,441,442],{},[64,443,444,446],{},[67,445,69],{},[67,447,81],{},[90,449,450],{"encoding":92},"R_f",[27,452,454],{"className":453,"ariaHidden":98},[97],[27,455,457,460],{"className":456},[102],[27,458],{"className":459,"style":388},[106],[27,461,463,466],{"className":462},[111],[27,464,69],{"className":465,"style":250},[111,177],[27,467,469],{"className":468},[182],[27,470,472,492],{"className":471},[149,150],[27,473,475,489],{"className":474},[154],[27,476,478],{"className":477,"style":315},[158],[27,479,480,483],{"style":265},[27,481],{"className":482,"style":199},[166],[27,484,486],{"className":485},[203,204,205,206],[27,487,81],{"className":488,"style":327},[111,177,206],[27,490,214],{"className":491},[213],[27,493,495],{"className":494},[154],[27,496,498],{"className":497,"style":221},[158],[27,499],{}," the risk-free rate, and ",[27,502,504,522],{"className":503},[34],[27,505,507],{"className":506},[38],[40,508,509],{"xmlns":42},[45,510,511,519],{},[48,512,513],{},[64,514,515,517],{},[67,516,86],{},[67,518,16],{},[90,520,521],{"encoding":92},"\\sigma_p",[27,523,525],{"className":524,"ariaHidden":98},[97],[27,526,528,532],{"className":527},[102],[27,529],{"className":530,"style":531},[106],"height:0.7167em;vertical-align:-0.2861em;",[27,533,535,538],{"className":534},[111],[27,536,86],{"className":537,"style":178},[111,177],[27,539,541],{"className":540},[182],[27,542,544,564],{"className":543},[149,150],[27,545,547,561],{"className":546},[154],[27,548,550],{"className":549,"style":192},[158],[27,551,552,555],{"style":195},[27,553],{"className":554,"style":199},[166],[27,556,558],{"className":557},[203,204,205,206],[27,559,16],{"className":560},[111,177,206],[27,562,214],{"className":563},[213],[27,565,567],{"className":566},[154],[27,568,570],{"className":569,"style":221},[158],[27,571],{}," the standard deviation of the portfolio's returns.",{"title":574,"searchDepth":575,"depth":575,"links":576},"",2,[577,578],{"id":13,"depth":575,"text":14},{"id":24,"depth":575,"text":25},"investing","A measure of return earned per unit of risk taken.","md",[],{},true,"\u002Fterms\u002Fsharpe-ratio",[587,588,589],"volatility","alpha","beta",{"title":6,"description":580},"terms\u002Fsharpe-ratio",[593,594,595],"The Sharpe ratio is excess return divided by volatility.","Higher means better risk-adjusted returns.","It relies on past data and standard deviation.","PewWeSgW6xLpjaSLOmi-Ws5FOUu_RrJbOg8FF_YbSUM",[598,602,606],{"title":599,"description":600,"path":601},"Alpha","The return an investment earns above (or below) its benchmark, after adjusting for risk.","\u002Fterms\u002Falpha",{"title":603,"description":604,"path":605},"Beta","A measure of how much a stock moves relative to the overall market.","\u002Fterms\u002Fbeta",{"title":607,"description":608,"path":609},"Volatility","How widely an 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