What is the Sharpe Ratio?

To view the Sharpe Ratio on the platform, first select your client from the client tree. Then, go to Portfolio and select Performance. Here, you can adjust the time period as needed. By clicking on the % Return in Period column, you will be able to find the Sharpe Ratio.

The Sharpe ratio measures the returns on an Account, in comparison to the risk taken to achieve those returns. It informs on the excess returns earned over and above a risk-free rate (best risk-free alternative to investing such as holding cash). The platform uses a risk-free rate of zero and calculates Sharpe Ratio for a period of at least 6 months. As the Sharpe ratio is a reward-to-risk ratio, the Account performance is risk-adjusted. This means that the excess returns earned over the risk-free rate are measured in relation to the risk (standard deviation) of the Account. The Sharpe ratio is calculated as:

Assume a realised return of 6% and a risk-free rate of 0%, with a standard deviation of 4.04%. The Sharpe ratio for the period is:

A high Sharpe ratio (above or equal to 1.0) indicates that the returns for the period were high (or 'good') relative to the risk taken in the period.