What Does Sharpe Ratio Mean?

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What does Sharpe Ratio mean? Read on to discover the definition & meaning of the term Sharpe Ratio - to help you better understand the language used in insurance policies.

Sharpe Ratio

Sharpe Ratio

A measurement often used to synthesize risk into an easy-to-understand metric. Sharpe ratio is a risk-adjusted measure calculated using standard deviation and excess return (the return of an investment in excess of a risk-free return, such as the 90-day Treasury bill) to determine reward per unit of risk. The higher the Sharpe ratio, the better the historical risk-adjusted performance is.

We hope the you have a better understanding of the meaning of Sharpe Ratio.

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