Securing Hannav Ledger...
Securing Hannav Ledger...
Glossary
Sharpe Ratio measures risk-adjusted return by dividing excess return over the risk-free rate by the standard deviation of returns.
Sharpe ratio tells you how much return you earned for each unit of risk taken. Higher is generally better for the same return level.
Sharpe = (Rp − Rf) / σp. It penalises volatility equally in both directions. Sortino ratio is an alternative focusing only on downside deviation for asymmetric return profiles.
Fund A returned 14% with 18% volatility; Fund B returned 12% with 10% volatility. With 7% risk-free rate, Fund A Sharpe = 0.39, Fund B Sharpe = 0.50 — B offered better risk-adjusted performance.
Sharpe Ratio = (Portfolio Return − Risk-free Rate) ÷ Standard Deviation of ReturnsAbove 1 is generally strong; 0.5–1 is acceptable; below 0.5 suggests weak risk-adjusted returns. Context and period length matter.
Yes, but debt fund volatility is lower, often producing higher Sharpe ratios that may not reflect credit or interest rate risks fully.
Analysts often use 91-day T-bill yield, 10-year G-sec yield, or fixed deposit rates as proxies depending on the analysis horizon.