The Sharpe ratio is a measure that helps investors or followers better understand the returns of a strategy provider compared to the risk they took. It helps give a more comprehensive picture of whether returns are due to good investment decisions or from taking excessive risk.

Basically, Sharpe ratio measures risk-adjusted returns.


The higher the Sharpe ratio, the greater the investment return relative to the risk taken. Generally speaking, a Sharpe ratio greater than 1 is considered good, while a Sharpe ratio greater than 3 is considered excellent.

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