Portfolio Analytics
Sharpe Ratio
Definition
What is Sharpe Ratio?
Excess return over a risk-free rate divided by total return volatility.
Example in practice
How This Looks in Practice
A fund earning 12% above cash with 8% volatility has a higher Sharpe ratio than one earning the same with 15% volatility.
Keep learning
Related Terms
Portfolio Analytics
Correlation
A statistic ranging from minus one to plus one that describes how two return series move together.
Portfolio AnalyticsPositive Correlation
A relationship in which two assets tend to move in the same direction.
Portfolio AnalyticsNegative Correlation
A relationship in which two assets tend to move in opposite directions.
Risk ManagementStress Test
An analysis of portfolio performance under severe but plausible scenarios.