Sharpe Ratio Definition
The Sharpe Ratio is a measure of the performance of a fund or portfolio compared to the risk free rate, after adjusting for the fund or portfolio's risk.
How we Calculate Sharpe
Since it's calculated based on the returns, we use the same formula for individual funds / stocks as well as portfolios.
The formula we use to calculate the Sharpe Ratio is:
We use treasury bills for our risk free rate. To learn more, please click here.
For further reading, Investopedia is a great resource with video explainers. The page on Sharpe ratio can be found here.