Sharpe ratio

The Sharpe ratio is a measure of relative risk of an asset, a portfolio, or a trading strategy. It is defined as: ${\displaystyle S={{<R>-R_{f}} \over \sigma }}$, where ${\displaystyle <R>}$ is the expected asset return, ${\displaystyle R_{f}}$ is the risk free rate of return, and ${\displaystyle \sigma }$ is the standard deviation of asset returns.