What is the Sharpe ratio tell us?

Definition: Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. If two funds offer similar returns, the one with higher standard deviation will have a lower Sharpe ratio.

Is a higher Sharpe ratio good or bad?

A Sharpe ratio of 1.0 is considered acceptable. A Sharpe ratio of 2.0 is considered very good. A Sharpe ratio of 3.0 is considered excellent. A Sharpe ratio of less than 1.0 is considered to be poor.

What is the Sharpe ratio of my portfolio?

The Sharpe ratio is calculated as follows: Subtract the risk-free rate from the return of the portfolio. The risk-free rate could be a U.S. Treasury rate or yield, such as the one-year or two-year Treasury yield. Divide the result by the standard deviation of the portfolio’s excess return.

Is the Sharpe ratio useful in asset allocation?

Investors often consider Sharpe ratios when making asset allocation decisions and comparing portfolios. Estimators of the Sharpe ratio have less helpful distributions than estimators of mean and variance. The error in the estimate of the Sharpe ratio can be simply too large to make useful conclusions.

Which stock has the highest Sharpe ratio?

High Sharpe Ratio Dividend Stocks in the S&P 500

• Mid-America Apartment Communities, Inc. (NYSE: MAA)
• WEC Energy Group, Inc. (NYSE: WEC)
• Sysco Corporation (NYSE: SYY) Number of Hedge Fund Holders: 40 Dividend Yield: 2.4\% Sharpe Ratio: 1.2.
• Broadcom Inc. (NASDAQ: AVGO)
• Xcel Energy Inc. (NASDAQ: XEL)

What Sharpe ratio is good?

Usually, any Sharpe ratio greater than 1.0 is considered acceptable to good by investors. A ratio higher than 2.0 is rated as very good. A ratio of 3.0 or higher is considered excellent. A ratio under 1.0 is considered sub-optimal.