Sharpe Ratio

Definição

The Sharpe ratio measures the risk-adjusted return of a trading strategy by calculating the excess return per unit of risk (standard deviation). A Sharpe ratio above 1.0 is considered good, above 2.0 is very good, and above 3.0 is excellent. It helps traders compare strategies with different risk profiles on an equal footing and is a standard metric in strategy evaluation and fund management.