A ratio that measures the performance of a product compared to a risk-free benchmark, after adjusting for its risk.
What does the chart show?
This chart shows the rolling outperformance (or underperformance) of a product over the selected risk-free product, typically a Bank Bill Index, or RBS Cash Rate, adjusted for the risk a product has taken to generate this outperformance (or underperformance).
How to interpret the ratio
When comparing Sharpe Ratios, a higher number is preferred. The higher the ratio, the higher the absolute return is for each unit of risk.
When to use the chart
The chart can be used by investors who would like to compare the risk-adjusted performance of multiple products or portfolios over time.
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