Investment word of the day: Sharpe Ratio—a key metric to assess risk vs reward. Here’s how to calculate it

Investment word of the day: To make informed investment choices, it is essential to analyse potential profits and losses. The Sharpe Ratio is a tool to determine potential risk-adjusted returns for any investment, including individual stocks, portfolios and hedge funds. “The Sharpe Ratio assists in investment analysis by evaluating risk-return relationships as it balances investment returns considering associated risks. The Sharpe Ratio helps to know the influence of risks on the returns of an investment. Among all the investment options available in the market, the Sharpe Ratio helps investors choose one that meets their financial goals.