Helps investors understand the return of an investment compared to its risk.
Formula: Sharpe = (Rx - Rf) / StdDev(Rx)
How to read it: ≥ 2.0 = excellent · 1.0–2.0 = good · 0.5–1.0 = acceptable · < 0.5 = poor. Thresholds assume annualised return, risk-free rate and volatility. To compute from a series of periodic returns, use sharpeFromReturns().
Created by Nobel laureate William F. Sharpe in 1966. It adjusts a portfolio's performance for the excess risk that was taken by the investor.