Sharpe Ratio ·
Excess Return per Unit of Volatility
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.com · Sharpe (1966) · (R_p − R_f) / σ_p
Sharpe
—
Stage
—
Beat
—
Steady portfolio · σ = 5%
Volatile portfolio · σ = 20%
Same end return (12%)
Risk-free rate (R_f = 3%)
Annualized × √252
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.com · Sharpe Ratio