Sharpe Ratio
Risk-adjusted performance ratio comparing average excess return with the total volatility of a portfolio or strategy.
Risk-adjusted performance ratios that compare return with total volatility, downside deviation, or systematic market risk.
The Sharpe, Sortino, and Treynor ratios compare return with different definitions of risk. They can produce different rankings from the same performance history because their denominators answer different questions.
Use the Sharpe Ratio when total return volatility is relevant. Use the Sortino Ratio when the analysis defines risk as falling below a stated target. Use the Treynor Ratio when comparing well-diversified portfolios by systematic market risk measured against the same benchmark.
None is a complete portfolio score. Before comparing values, align the return period, data frequency, reference rate, fee basis, annualization method, and risk convention. Then check drawdown, tail loss, liquidity, leverage, concentration, and correlation separately.
This section is for financial education and does not recommend a portfolio, fund, benchmark, or strategy.
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Risk-adjusted performance ratio comparing average excess return with the total volatility of a portfolio or strategy.
Downside-risk-adjusted performance ratio comparing return above a target with deviation below that same target.
Risk-adjusted performance ratio comparing excess portfolio return with systematic market risk measured by beta.