Angie · learn
Sharpe ratio
Return per unit of volatility. It asks how much turbulence you endured for the gain, so a smoother path scores better than a wild one that ends up level with it.
A fuller explanation of this one is still being written. The definition above is the short answer.
See also
- Calmar ratio — Return measured against the worst loss along the way, rather than against general choppiness. It punishes the single deepest hole.
- Max drawdown — The deepest fall from a peak before a new peak was reached. The number that decides whether a strategy is one you could actually hold through.
- CAGR — Total return restated as a steady yearly rate, which makes runs of different lengths comparable.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
