{"id":15563,"date":"2021-12-21T05:23:57","date_gmt":"2021-12-21T05:23:57","guid":{"rendered":"https://www.5paisa.com/finschool/?post_type=finance-dictionary\u0026#038;p=15563"},"modified":"2025-04-25T23:10:50","modified_gmt":"2025-04-25T17:40:50","slug":"what-is-sharpe-ratio","status":"publish","type":"finance-dictionary","link":"https://www.5paisa.com/finschool/finance-dictionary/what-is-sharpe-ratio/","title":{"rendered":"Sharpe Ratio"},"content":{"rendered":"\u003cdiv data-elementor-type=\u0022wp-post\u0022 data-elementor-id=\u002215563\u0022 class=\u0022elementor elementor-15563\u0022\u003e\u003csection class=\u0022elementor-section elementor-top-section elementor-element elementor-element-68323fa elementor-section-boxed elementor-section-height-default elementor-section-height-default\u0022 data-id=\u002268323fa\u0022 data-element_type=\u0022section\u0022\u003e\u003cdiv class=\u0022elementor-container elementor-column-gap-default\u0022\u003e\u003cdiv class=\u0022elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-391ca65\u0022 data-id=\u0022391ca65\u0022 data-element_type=\u0022column\u0022\u003e\u003cdiv class=\u0022elementor-widget-wrap elementor-element-populated\u0022\u003e\u003cdiv class=\u0022elementor-element elementor-element-9cc8ab9 elementor-widget elementor-widget-text-editor\u0022 data-id=\u00229cc8ab9\u0022 data-element_type=\u0022widget\u0022 data-widget_type=\u0022text-editor.default\u0022\u003e\u003cdiv class=\u0022elementor-widget-container\u0022\u003e\u003ch2\u003eWhat is Sharpe Ratio?\u003c/h2\u003e\u003cp\u003eThe Sharpe Ratio is a crucial metric in finance, commonly used to evaluate the risk-adjusted returns of an investment, including the performance of a mutual fund Sharpe Ratio. Investors often aim for the best Sharpe Ratio, as a good Sharpe Ratio, such as above 1, indicates efficient risk management. Understanding the Sharpe Ratio meaning helps in assessing whether high Sharpe Ratio means better returns for the risk taken, while the ideal Sharpe Ratio can vary by portfolio type. Learning to calculate Sharpe Ratio , using the formula of Sharpe Ratio , ensures accuracy when comparing investments, like evaluating the highest Sharpe Ratio portfolio or analyzing example of Sharpe Ratio performance. This metric is a powerful tool for identifying optimal investments in diverse financial landscapes.\u003c/p\u003e\u003ch2\u003e\u003cspan style=\u0022color: #000080;\u0022\u003e\u003cstrong\u003e\u003cspan style=\u0022color: #000000;\u0022\u003eImportance of Sharpe ratio\u003c/span\u003e \u003c/strong\u003e\u003c/span\u003e\u003c/h2\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eAnalyse the fund’s performance-\u003c/strong\u003e The Sharpe Ratio help’s investors to shed light on a fund’s performance. By looking at Sharpe Ratio, investors can carry out the level of risk of any fund in comparison with the extra returns. It is majorly used to analyse mutual funds operations with both growth and value style.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eStudy The Portfolio Diversification-\u003c/strong\u003e With the help of the Sharpe Ratio, investors can use it as a tool to identify the need for portfolio diversification.\u003c/li\u003e\u003cli\u003eSuppose, if an investor is invested in a fund with a Sharpe Ratio of 2.00, adding other funds to the portfolio would help reduce ratio and risk factors.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eHelps in Fund Comparison-\u003c/strong\u003e Beginners have the opportunity and can compare the Sharpe Ratios of various mutual funds to analyse their risk factors and adjusted-return rates.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eInvestors Can Calculate the Risk Factor-\u003c/strong\u003e with the Sharpe Ratio, investors can easily calculate all the risk factors before investing in mutual funds. In addition, existing investors can also decide to transfer their investment if their present fund gains a low Sharpe Ratio.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eExamine The Risk and Return Rate-\u003c/strong\u003e A fund having a higher Sharpe Ratio is considered great because it gives higher returns and higher risk. Therefore, investors looking to earn higher returns tend to opt for a fund that comes with a high ratio.\u003c/li\u003e\u003cli\u003eHowever, it can change the equation because a fund giving 5% returns with moderate volatility is always better than a fund having 7% returns with high volatility.\u003c/li\u003e\u003c/ul\u003e\u003ch2\u003e\u003cstrong\u003eHow to Calculate Sharpe Ratio?\u003c/strong\u003e\u003c/h2\u003e\u003ch3\u003eSharpe Ratio Formula\u003c/h3\u003e\u003cp\u003eThe formula for the Sharpe Ratio is as follows:\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eSharpe Ratio= Portfolio Return−Risk-Free Rate/Standard Deviation of Portfolio Returns\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eWhere:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003ePortfolio Return\u003c/strong\u003e: The average return of the investment or portfolio.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eRisk-Free Rate\u003c/strong\u003e: The return from a risk-free investment, such as government bonds.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eStandard Deviation\u003c/strong\u003e: A measure of the investment’s volatility or risk.\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003cstrong\u003eCalculating Sharpe Ratio \u003c/strong\u003e\u003c/h3\u003e\u003cp\u003eHere’s how you can calculate it step by step:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eStep 1\u003c/strong\u003e: Identify the average return of the portfolio over a specific time period (e.g., yearly, monthly).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eStep 2\u003c/strong\u003e: Subtract the risk-free rate of return from the portfolio’s average return. This is called the \u003cstrong\u003eexcess return\u003c/strong\u003e.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eStep 3\u003c/strong\u003e: Measure the standard deviation of the portfolio returns over the same time period. This represents the investment’s risk.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eStep 4\u003c/strong\u003e: Divide the excess return by the standard deviation to compute the Sharpe Ratio.\u003c/li\u003e\u003c/ul\u003e\u003ch2\u003e\u003cspan style=\u0022color: #000000;\u0022\u003e\u003cstrong\u003eExample of how to use the Sharpe ratio\u003c/strong\u003e\u003c/span\u003e\u003c/h2\u003e\u003cp\u003eIf a portfolio has an annual return of 12%, the risk-free rate is 2%, and the standard deviation of its returns is 10%, the Sharpe Ratio is:\u003c/p\u003e\u003cp\u003eSharpe Ratio=12%−2%/10% =1.0\u003c/p\u003e\u003cp\u003eThis indicates the portfolio earns 1 unit of return per unit of risk. A higher Sharpe Ratio would generally indicate a better risk-adjusted return.\u003c/p\u003e\u003ch2\u003eWhat is a Good Sharpe Ratio?\u003c/h2\u003e\u003cp\u003eThe below-given table shows the indicators of the good and bad Sharpe Ratio. Investments having less than 1.00 do not generate higher investor returns.\u003c/p\u003e\u003cp\u003eHowever, investments with Sharpe Ratio between 1.00 to 3.00 are considered great Sharpe Ratio and investments above 3.000 are considered excellent Sharpe Ratio.\u003c/p\u003e\u003ctable width=\u0022707\u0022\u003e\u003ctbody\u003e\u003ctr\u003e\u003ctd\u003e\u003cp\u003e\u003cstrong\u003eSharpe Ratio\u003c/strong\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd\u003e\u003cp\u003e\u003cstrong\u003eRisk Rate\u003c/strong\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd\u003e\u003cp\u003e\u003cstrong\u003eVerdict\u003c/strong\u003e\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd\u003e\u003cp\u003e\u003cstrong\u003eLess than 1.00\u003c/strong\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd\u003e\u003cp\u003eVery low\u003c/p\u003e\u003c/td\u003e\u003ctd\u003e\u003cp\u003ePoor\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd\u003e\u003cp\u003e\u003cstrong\u003e1.00 – 1.99\u003c/strong\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd\u003e\u003cp\u003ehigh\u003c/p\u003e\u003c/td\u003e\u003ctd\u003e\u003cp\u003eGood\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd\u003e\u003cp\u003e\u003cstrong\u003e2.00 – 2.99\u003c/strong\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd\u003e\u003cp\u003ehigh\u003c/p\u003e\u003c/td\u003e\u003ctd\u003e\u003cp\u003eGreat\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd\u003e\u003cp\u003e\u003cstrong\u003e3.00 or above\u003c/strong\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd\u003e\u003cp\u003ehigh\u003c/p\u003e\u003c/td\u003e\u003ctd\u003e\u003cp\u003eExcellent\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003c/tbody\u003e\u003c/table\u003e\u003ch2\u003e\u003cspan style=\u0022color: #000000;\u0022\u003e\u003cstrong\u003eLimitations of Sharpe ratio \u003c/strong\u003e\u003c/span\u003e\u003c/h2\u003e\u003cp\u003eWhile the Sharpe Ratio is widely regarded as a valuable metric, it is not without its drawbacks:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSimplistic Measure\u003c/strong\u003e: It assumes returns follow a normal distribution and does not account for skewness or kurtosis, which could lead to inaccuracies in evaluating highly volatile investments.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eRisk-Free Rate\u003c/strong\u003e: The choice of risk-free rate can impact the results, especially in environments with fluctuating interest rates.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eNon-Dynamic\u003c/strong\u003e: It works best for comparing investments over a specific timeframe but may not effectively evaluate long-term or dynamic portfolios.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eIgnores Other Risks\u003c/strong\u003e: It does not factor in risks like liquidity risk, credit risk, or market conditions beyond standard deviation.\u003c/li\u003e\u003c/ul\u003e\u003ch2\u003eImpact of Standard Deviation on Sharpe Ratio\u003c/h2\u003e\u003cp\u003e\u003cstrong\u003eStandard deviation\u003c/strong\u003e is crucial for calculating the Sharpe Ratio as it measures the volatility or risk of an investment:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eHigher Standard Deviation\u003c/strong\u003e: Indicates greater risk and lowers the Sharpe Ratio, implying less efficient risk-adjusted returns.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eLower Standard Deviation\u003c/strong\u003e: Suggests lower risk and increases the Sharpe Ratio, making the investment seem more favorable. However, standard deviation alone may not fully capture risks specific to the investment, which could lead to over-reliance on the metric.\u003c/li\u003e\u003c/ul\u003e\u003ch2\u003eThings to Keep in Mind When Using Sharpe Ratio\u003c/h2\u003e\u003cp\u003eWhen employing the Sharpe Ratio for investment decisions:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eCompare Similar Assets\u003c/strong\u003e: Only compare investments of similar nature to ensure meaningful analysis.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eLong-Term Perspective\u003c/strong\u003e: Avoid basing decisions solely on short-term Sharpe Ratios, as market conditions can skew the results.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eConsider Other Metrics\u003c/strong\u003e: Use complementary metrics like Sortino Ratio or Treynor Ratio for a more nuanced understanding of performance.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBe Mindful of Assumptions\u003c/strong\u003e: Understand the underlying assumptions of Sharpe Ratio to avoid misinterpretation.\u003c/li\u003e\u003c/ul\u003e\u003ch2\u003eConclusion\u003c/h2\u003e\u003cp\u003eThe Sharpe Ratio is a useful tool for evaluating risk-adjusted returns and comparing investments, but it is not flawless. To make more informed decisions, it’s best to use it alongside other performance measures and to be mindful of its limitations. It serves as a valuable starting point for understanding investments but should never be the sole metric driving decisions.\u003c/p\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/section\u003e\u003csection class=\u0022elementor-section elementor-top-section elementor-element elementor-element-9fad823 elementor-section-boxed elementor-section-height-default elementor-section-height-default\u0022 data-id=\u00229fad823\u0022 data-element_type=\u0022section\u0022\u003e\u003cdiv class=\u0022elementor-container elementor-column-gap-default\u0022\u003e\u003cdiv class=\u0022elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-6eb6a6f\u0022 data-id=\u00226eb6a6f\u0022 data-element_type=\u0022column\u0022\u003e\u003cdiv class=\u0022elementor-widget-wrap elementor-element-populated\u0022\u003e\u003cdiv class=\u0022elementor-element elementor-element-a6ac395 elementor-widget elementor-widget-heading\u0022 data-id=\u0022a6ac395\u0022 data-element_type=\u0022widget\u0022 data-widget_type=\u0022heading.default\u0022\u003e\u003cdiv class=\u0022elementor-widget-container\u0022\u003e\u003ch2 class=\u0022elementor-heading-title elementor-size-default\u0022\u003eFrequently Asked Questions\u003c/h2\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/section\u003e\u003csection class=\u0022elementor-section elementor-top-section elementor-element elementor-element-3be5e5f elementor-section-boxed elementor-section-height-default elementor-section-height-default\u0022 data-id=\u00223be5e5f\u0022 data-element_type=\u0022section\u0022\u003e\u003cdiv class=\u0022elementor-container elementor-column-gap-default\u0022\u003e\u003cdiv class=\u0022elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-4d7b89a\u0022 data-id=\u00224d7b89a\u0022 data-element_type=\u0022column\u0022\u003e\u003cdiv class=\u0022elementor-widget-wrap elementor-element-populated\u0022\u003e\u003cdiv class=\u0022elementor-element elementor-element-b4ad47d elementor-widget elementor-widget-accordion\u0022 data-id=\u0022b4ad47d\u0022 data-element_type=\u0022widget\u0022 data-widget_type=\u0022accordion.default\u0022\u003e\u003cdiv class=\u0022elementor-widget-container\u0022\u003e\u003cdiv class=\u0022elementor-accordion\u0022\u003e\u003cdiv class=\u0022elementor-accordion-item\u0022\u003e\u003cdiv id=\u0022elementor-tab-title-1891\u0022 class=\u0022elementor-tab-title\u0022 data-tab=\u00221\u0022 role=\u0022button\u0022 aria-controls=\u0022elementor-tab-content-1891\u0022 aria-expanded=\u0022false\u0022\u003e\u003cspan class=\u0022elementor-accordion-icon elementor-accordion-icon-left\u0022 aria-hidden=\u0022true\u0022\u003e\u003cspan class=\u0022elementor-accordion-icon-closed\u0022\u003e\u003ci class=\u0022fas fa-plus\u0022\u003e\u003c/i\u003e\u003c/span\u003e\u003cspan class=\u0022elementor-accordion-icon-opened\u0022\u003e\u003ci class=\u0022fas fa-minus\u0022\u003e\u003c/i\u003e\u003c/span\u003e\u003c/span\u003e\u003ca class=\u0022elementor-accordion-title\u0022 tabindex=\u00220\u0022\u003eIs 1.5 a good sharpe ratio?\u003c/a\u003e\u003c/div\u003e\u003cdiv id=\u0022elementor-tab-content-1891\u0022 class=\u0022elementor-tab-content elementor-clearfix\u0022 data-tab=\u00221\u0022 role=\u0022region\u0022 aria-labelledby=\u0022elementor-tab-title-1891\u0022\u003e\u003cp\u003eA Sharpe ratio of 1.5 is generally considered good as it indicates strong risk-adjusted returns.\u003c/p\u003e\u003c/div\u003e\u003c/div\u003e\u003cdiv class=\u0022elementor-accordion-item\u0022\u003e\u003cdiv id=\u0022elementor-tab-title-1892\u0022 class=\u0022elementor-tab-title\u0022 data-tab=\u00222\u0022 role=\u0022button\u0022 aria-controls=\u0022elementor-tab-content-1892\u0022 aria-expanded=\u0022false\u0022\u003e\u003cspan class=\u0022elementor-accordion-icon elementor-accordion-icon-left\u0022 aria-hidden=\u0022true\u0022\u003e\u003cspan class=\u0022elementor-accordion-icon-closed\u0022\u003e\u003ci class=\u0022fas fa-plus\u0022\u003e\u003c/i\u003e\u003c/span\u003e\u003cspan class=\u0022elementor-accordion-icon-opened\u0022\u003e\u003ci class=\u0022fas fa-minus\u0022\u003e\u003c/i\u003e\u003c/span\u003e\u003c/span\u003e\u003ca class=\u0022elementor-accordion-title\u0022 tabindex=\u00220\u0022\u003eIs 0.4 Sharpe Ratio bad?\u003c/a\u003e\u003c/div\u003e\u003cdiv id=\u0022elementor-tab-content-1892\u0022 class=\u0022elementor-tab-content elementor-clearfix\u0022 data-tab=\u00222\u0022 role=\u0022region\u0022 aria-labelledby=\u0022elementor-tab-title-1892\u0022\u003e\u003cp\u003eA Sharpe ratio of 0.4 is relatively low and may signal insufficient returns compared to the risk.\u003c/p\u003e\u003c/div\u003e\u003c/div\u003e\u003cdiv class=\u0022elementor-accordion-item\u0022\u003e\u003cdiv id=\u0022elementor-tab-title-1893\u0022 class=\u0022elementor-tab-title\u0022 data-tab=\u00223\u0022 role=\u0022button\u0022 aria-controls=\u0022elementor-tab-content-1893\u0022 aria-expanded=\u0022false\u0022\u003e\u003cspan class=\u0022elementor-accordion-icon elementor-accordion-icon-left\u0022 aria-hidden=\u0022true\u0022\u003e\u003cspan class=\u0022elementor-accordion-icon-closed\u0022\u003e\u003ci class=\u0022fas fa-plus\u0022\u003e\u003c/i\u003e\u003c/span\u003e\u003cspan class=\u0022elementor-accordion-icon-opened\u0022\u003e\u003ci class=\u0022fas fa-minus\u0022\u003e\u003c/i\u003e\u003c/span\u003e\u003c/span\u003e\u003ca class=\u0022elementor-accordion-title\u0022 tabindex=\u00220\u0022\u003e What if the sharpe ration is zero?\u003c/a\u003e\u003c/div\u003e\u003cdiv id=\u0022elementor-tab-content-1893\u0022 class=\u0022elementor-tab-content elementor-clearfix\u0022 data-tab=\u00223\u0022 role=\u0022region\u0022 aria-labelledby=\u0022elementor-tab-title-1893\u0022\u003e\u003cp\u003eA Sharpe ratio of zero means the investment returns match the risk-free rate, offering no excess return.\u003c/p\u003e\u003c/div\u003e\u003c/div\u003e\u003cdiv class=\u0022elementor-accordion-item\u0022\u003e\u003cdiv id=\u0022elementor-tab-title-1894\u0022 class=\u0022elementor-tab-title\u0022 data-tab=\u00224\u0022 role=\u0022button\u0022 aria-controls=\u0022elementor-tab-content-1894\u0022 aria-expanded=\u0022false\u0022\u003e\u003cspan class=\u0022elementor-accordion-icon elementor-accordion-icon-left\u0022 aria-hidden=\u0022true\u0022\u003e\u003cspan class=\u0022elementor-accordion-icon-closed\u0022\u003e\u003ci class=\u0022fas fa-plus\u0022\u003e\u003c/i\u003e\u003c/span\u003e\u003cspan class=\u0022elementor-accordion-icon-opened\u0022\u003e\u003ci class=\u0022fas fa-minus\u0022\u003e\u003c/i\u003e\u003c/span\u003e\u003c/span\u003e\u003ca class=\u0022elementor-accordion-title\u0022 tabindex=\u00220\u0022\u003eIs there negative sharpe ratio?\u003c/a\u003e\u003c/div\u003e\u003cdiv id=\u0022elementor-tab-content-1894\u0022 class=\u0022elementor-tab-content elementor-clearfix\u0022 data-tab=\u00224\u0022 role=\u0022region\u0022 aria-labelledby=\u0022elementor-tab-title-1894\u0022\u003e\u003cp\u003eYes, a negative Sharpe ratio is possible and indicates that the investment underperforms the risk-free rate.\u003c/p\u003e\u003c/div\u003e\u003c/div\u003e\u003cdiv class=\u0022elementor-accordion-item\u0022\u003e\u003cdiv id=\u0022elementor-tab-title-1895\u0022 class=\u0022elementor-tab-title\u0022 data-tab=\u00225\u0022 role=\u0022button\u0022 aria-controls=\u0022elementor-tab-content-1895\u0022 aria-expanded=\u0022false\u0022\u003e\u003cspan class=\u0022elementor-accordion-icon elementor-accordion-icon-left\u0022 aria-hidden=\u0022true\u0022\u003e\u003cspan class=\u0022elementor-accordion-icon-closed\u0022\u003e\u003ci class=\u0022fas fa-plus\u0022\u003e\u003c/i\u003e\u003c/span\u003e\u003cspan class=\u0022elementor-accordion-icon-opened\u0022\u003e\u003ci class=\u0022fas fa-minus\u0022\u003e\u003c/i\u003e\u003c/span\u003e\u003c/span\u003e\u003ca class=\u0022elementor-accordion-title\u0022 tabindex=\u00220\u0022\u003eWhat is considered a good Sharpe ratio in India?\u003c/a\u003e\u003c/div\u003e\u003cdiv id=\u0022elementor-tab-content-1895\u0022 class=\u0022elementor-tab-content elementor-clearfix\u0022 data-tab=\u00225\u0022 role=\u0022region\u0022 aria-labelledby=\u0022elementor-tab-title-1895\u0022\u003e\u003cp\u003eIn India, a Sharpe ratio above 1 is generally considered good, but higher is always better depending on the risk appetite.\u003c/p\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/section\u003e\u003c/div\u003e","protected":false},"excerpt":{"rendered":"\u003cp\u003eWhat is Sharpe Ratio? The Sharpe Ratio is a crucial metric in finance, commonly used to evaluate the risk-adjusted returns of an investment, including the performance of a mutual fund Sharpe Ratio. Investors often aim for the best Sharpe Ratio, as a good Sharpe Ratio, such as above 1, indicates efficient risk management. Understanding the … \u003ca title=\u0022Sharpe Ratio\u0022 class=\u0022read-more\u0022 href=\u0022https://www.5paisa.com/gujarati/finschool/finance-dictionary/what-is-sharpe-ratio/\u0022 aria-label=\u0022Read more about Sharpe Ratio\u0022\u003eRead more\u003c/a\u003e\u003c/p\u003e","protected":false},"author":1,"featured_media":70598,"parent":0,"menu_order":272,"comment_status":"closed","ping_status":"closed","template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"class_list":["post-15563","finance-dictionary","type-finance-dictionary","status-publish","format-standard","has-post-thumbnail","hentry","finance-dictionary-terms-s"],"acf":[],"_links":{"self":[{"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/finance-dictionary/15563","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/finance-dictionary"}],"about":[{"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/types/finance-dictionary"}],"author":[{"embeddable":true,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/users/1"}],"replies":[{"embeddable":true,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/comments?post=15563"}],"version-history":[{"count":18,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/finance-dictionary/15563/revisions"}],"predecessor-version":[{"id":70602,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/finance-dictionary/15563/revisions/70602"}],"wp:featuredmedia":[{"embeddable":true,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/media/70598"}],"wp:attachment":[{"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/media?parent=15563"}],"curies":[{"name":"wp","href":"https://api.w.org/{rel}","templated":true}]}}