Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Sharpe Ratio Sharpe ratio evaluates the performance of a portfolio based on the total risk of a portfolio. It measures the excess return generated by a portfolio over the risk free rate in relation to the total risk or standard deviation of a portfolio. Sharpe Ratio= (Rp - Rf)/σ Where, Rp=return on the portfolio, Rf= risk free rate and ?= standard deviation of the return of the portfolio Higher the Sharpe ratio, better is the fund. Illustration: Consider two funds A and B. Let return of fund A be 30% and that of fund B be 25%. On the outset, it appears that fund A has performed better than Fund B. Let us now incorporate the risk factor and find out the Sharpe ratios for the funds. Let risk of Fund A and Fund B be 11% and 5% respectively. This
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