A statistical measure which attempts to show the performance of a portfolio’s return in risk adjusted terms. It is calculated by dividing the portfolio’s excess return over the risk-free rate by the risk (i.e. standard deviation) of portfolio returns. The higher the Sharpe Ratio, the better the portfolio’s return in risk adjusted terms. A Sharpe Ratio higher than one can be considered to be very good, while a ratio below 0.1 shows that the portfolio has been poorly rewarded for the risk undertaken.