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Risk
Sharpe Ratio
(Return − Risk-free) / Volatility
Definition
Sharpe ratio measures risk-adjusted returns by dividing excess return by volatility. Formula: (Portfolio Return - Risk-Free Rate) / Portfolio Volatility. Higher ratios indicate better risk-adjusted performance.
Related Topics
#risk-adjusted returns
#volatility
#performance measurement
#portfolio evaluation
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Related Terms
Category: Risk
Risk management involves identifying, assessing, and controlling potential losses in investment portfolios.
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