Sharpe ratio
By Jude Wallis
The Sharpe ratio is a portfolio's return minus a matching risk-free rate, divided by the standard deviation of that portfolio's returns. The result is a ratio, not a percent.
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The numerator is the realised risk premium over the window. The denominator is the standard deviation of returns on the same scale. A result of 0.8 means 0.8 units of excess return per unit of measured volatility.
The risk-free rate has to match the window and the currency. Mixing a monthly return with an annual rate makes the numerator meaningless.
How the Sharpe ratio works is the explainer. The Sharpe ratio calculator applies the division. Volatility is the broader word for how widely results swing.