Welcome
Settings
Policy
COOKIES
We use cookies to give you the best online experience. Strictly necessary cookies are on by default. Additional cookies are off by default. You can choose which of these additional cookies to allow by enabling them on our settings tab.
All the data we collect is anonymous, in accordance with the GDPR.
Your cookie preferences will be stored for one year, but you can modify your preferences at any time by clicking on ‘Cookies’ in our footer.
Analytics
These cookies track what pages are visited on our website, to help us monitor and improve our content.
Cookies
We use cookies from:
- Google Analytics
- Zoom Info
Media
We embed videos and other media hosted by third parties. Cookies help us keep track of what videos are being watched, and allow those third parties to serve you related content on their own sites. The videos will still work if you do not accept cookies.
Cookies
We use cookies from:
- YouTube
- Vimeo
Other
Miscellaneous cookies – currently none from third parties.
Cookies
xxx
Essential
Cookies
Cookie policy
Sharpe Ratio
The Sharpe ratio measures risk-adjusted performance by comparing excess return over a risk-free rate to total volatility. It is widely used in portfolio management, trading evaluation, and investment analysis.
For example, an oil trading fund generating returns above the risk-free rate with low price volatility will have a high Sharpe ratio, indicating efficient risk-reward management. Conversely, high volatility reduces the ratio, signaling less attractive risk-adjusted performance.
Traders use the Sharpe ratio to compare strategies, assess hedging effectiveness, and optimize portfolio allocation. It supports decision-making by highlighting whether returns adequately compensate for exposure to risk.
The ratio is valuable in commodities, equities, and derivative markets, helping participants identify consistent, risk-efficient trading opportunities and improve long-term financial outcomes.