Skip to main content
MarketSurfer

What is Sharpe Ratio?

Statistics

Sharpe Ratio

Return divided by the volatility experienced while earning it. The less the results swung to produce the same return, the higher the value. Looking at return alone lets one lucky large win distort the whole picture; dividing by volatility reduces that distortion. With few observations the value itself is unstable, so check first that there are enough records.

Sharpe Ratioaverage returnvariation (std. dev.)return ÷ variationhigher is better

Related terms

← All glossary terms

Sharpe Ratio meaning — Trading glossary | MarketSurfer