The Sharpe Ratio is a formula used to measure risk/return. The ratio describes the amount of extra return received for the extra volatility of a more risky asset. The higher the Sharpe Ratio, the greater returns are for each unit of risk. The Sharpe Ratio is calculated by subtracting the risk free rate or return from the return of the portfolio and then dividing by the portfolio’s standard deviation. By using the Sharpe Ratio, investors can theoretically compare risk adjusted returns of investments or portfolios that have different returns and …