Sharpe Ratio

Sharpe Ratio This ratio was developed by a man named William F. Sharpe and it is meant to figure out how much reward is involved with the risk that an investment contains. For example, an investor might believe that a high risk, high reward type of situation is worth it, but would not feel the same way about a high risk, low reward investment. This is called a risk-adjusted performance and is in place to predict how a stock could behave in the future, while applying a number value to its likelihood of return in comparison to the risk that is undertaken through the investment.