What is the Sharpe ratio

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Introduction

sharp ratio ko noble inaam Yafta william f sharp ne tayyar kya tha aur is ka istemaal sarmaya karon ko is ke khatray ke muqablay mein sarmaya kaari ki wapsi ko samajhney mein madad karne ke liye kya jata hai. tanasub utaar charhao ya kal rissk ki fi unit khatray se pak sharah se ziyada kamaai jane wali ost wapsi hai. utaar charhao kisi asasa ya port folyo ki qeemat ke utaar charhao ka aik pemana hai. ost wapsi se khatray se pak sharah ko ghatana aik sarmaya car ko khatrah mol lainay ki sar garmion se wabasta munafe ko behtar tareeqay se allag karne ki ijazat deta hai. wapsi ki khatray se pak sharah sifar khatraat ke sath sarmaya kaari ki wapsi hai, yani yeh woh wapsi hai jis ki sarmaya car koi khatrah mol lainay ki tawaqqa nahi kar satke hain. misaal ke tor par, you s trisri band ki pedawar ko khatray se pak sharah ke tor par istemaal kya ja sakta hai. sharp ratio rissk adjust shuda wapsi ka hisaab laganay ke liye sab se ziyada istemaal honay walay tareeqon mein se aik hai. modern port folyo theory ( mpt ) kehti hai ke mtnoa port folyo mein asason ko shaamil karna jis ka kam bahami talluq hai wapsi ki qurbani ke baghairport folyo ke khatray ko kam kar sakta hai. tanawu ko shaamil karne se mtnoa ki nichli satah ke sath mlitay jaltay port fuels ke muqablay mein taiz tanasub mein izafah hona chahiye. is ke durust honay ke liye, sarmaya karon ko yeh mafrooza bhi qubool karna chahiye ke khatrah utaar charhao ke barabar hai, jo ke ghair maqool nahi hai lekin tamam sarmaya kaari par laago honay ke liye bohat tang ho sakta hai. taiz tanasub ka istemaal port folyo ki maazi ki karkardagi ( Sabiqa post ) ka jaiza lainay ke liye kya ja sakta hai jahan formulay mein asal wapsi ka istemaal kya jata hai. mutabadil tor par, aik sarmaya car mutawaqqa port folyo ki karkardagi aur mutawaqqa khatray se pak sharah ka takhmeenah laganay ke liye istemaal kar sakta hai. bohat ziyada khatrah. agarchay aik port folyo ya fund –apne sathiyon ke muqablay ziyada munafe se lutaf andoz ho sakta hai, lekin yeh sirf aik achi sarmaya kaari hai agar woh ziyada munafe izafi khatray ke sath nahi aata hai. aik port folyo ka taiz tanasub jitna ziyada hoga, is ki rissk adjust shuda karkardagi itni hi behtar hogi. agar tajzia ka nateeja manfi sharp tanasub mein hota hai, to is ka matlab hai ke ya to khatray se pak sharah port folyo ki wapsi se ziyada hai, ya port folyo ki wapsi manfi honay ki tawaqqa hai. dono sooraton mein, manfi taiz tanasub koi mufeed maienay nahi deta .

Example of how to use Sharpe ratio

sharp tanasub ka istemaal aksar khatray ki wapsi ki majmoi khususiyaat mein tabdeeli ka mawazna karne ke liye kya jata hai jab port folyo mein aik naya asasa ya asasa class shaamil kya jata hai. misaal ke tor par, aik sarmaya car –apne mojooda port folyo mein hadge fund mukhtas karne par ghhor kar raha hai jo fi al haal stock aur bandz ke darmiyan taqseem hai aur pichlle saal ke douran is ne 15 % wapas kya hai. mojooda khatray se pak sharah 3. 5 % hai, aur port folyo ke munafe ka utaar charhao 12 % tha, jo 95. 8 %, ya ( 15 % - 3. 5 % ) ko 12 % se taqseem karta hai. sarmaya car ka khayaal hai ke hadge fund ko port folyo mein shaamil karne se anay walay saal ke liye mutawaqqa munafe 11 % tak kam ho jaye ga, lekin sath hi port folyo ka utaar charhao bhi 7 % tak girnay ki tawaqqa rakhta hai. woh farz karte hain ke anay walay saal mein khatray se pak sharah wohi rahay gi. isi formulay ka istemaal karte hue, mustaqbil ke tkhmini adaad ke sath, sarmaya car ko pata chalta hai ke port folyo ka mutawaqqa taiz tanasub 107 %, ya ( 11 % - 3. 5 % ) 7 % se taqseem hai .yahan, sarmaya car ne zahir kya hai ke agarchay hadge fund ki sarmaya kaari port folyo ki mutlaq wapsi ko kam kar rahi hai, lekin is ne khatray ke mutabiq adjust ki bunyaad par apni karkardagi ko behtar banaya hai. agar nai sarmaya kaari ke izafay se sharp tanasub kam hota hai, to usay port folyo mein shaamil nahi kya jana chahiye. yeh misaal farz karti hai ke maazi ki karkardagi par mabni taiz tanasub ka mustaqbil ki mutawaqqa karkardagi se kaafi had tak mawazna kya ja sakta hai .

Limitation of using Sharpe ratio

sharp ratio denominator mein return ke mayaari inhiraf ko is ke kal port folyo rissk ke proxy ke tor par istemaal karta hai, jo yeh farz karta hai ke return aam tor par taqseem kiye jatay hain. data ki aam taqseem nard ke aik jore ko rule karne ke mutradif hai. hum jantay hain ke bohat saaray rules par, days se sab se ziyada aam nateeja saat hoga, aur kam se kam aam nataij do aur baara hon ge. taham, maliyati mandiyon mein wapsi ost se hatt gayi hai kyunkay barri tadaad mein heran kin kami waqay hui hai. ya qeematon mein izafah. mazeed bar-aan, mayaari inhiraf yeh maanta hai ke dono simtao mein qeemat ki naqal o harkat yaksaa tor par khatarnaak hai. sharp tanasub ko port folyo minijrz ke zareya jor toar kya ja sakta hai jo un ki zahiri khatray se adjust shuda wapsi ki tareekh ko barhana chahtay hain. yeh pemaiesh ke waqfay ko lamba karkay kya ja sakta hai. is ke nateejay mein utaar charhao ka kam takhmeenah hoga. misaal ke tor par, yomiya return ka salana mayaari inhiraf aam tor par hafta waar return se ziyada hota hai jo ke badlay mein, mahana return se ziyada hota hai. tajzia ke liye behtareen mumkina sharp ratio ke sath muddat ka intikhab, ghair janabdaar nazar wapsi ki muddat ke bajaye, data ko chhere chunnay ka aik aur tareeqa hai jo khatray ke sath adjust shuda wapisun ko maskh kar day ga .

How is the Sharpe ratio calculate

taiz tanasub ka hisaab laganay ke liye, sarmaya car pehlay port folyo ki sharah munafe se khatray se pak sharah ko ghataty hain, aksar you s trisri band ki pedawar ko khatray se pak wapsi ki sharah ke liye bator proxy istemaal karte hain. phir, woh nateeja ko port folyo ki izafi wapsi ke mayaari inhiraf se taqseem karte hain. note karen ke mayaari inhiraf ka istemaal karte hue, yeh farmolh wazeh tor par yeh farz karta hai ke port folyo ke munafe ko aam tor par taqseem kya jata hai, jo haqeeqat mein aisa nahi ho sakta

Re: What is the Sharpe ratio

The Sharpe ratio is a measure of risk-adjusted return that is commonly used in finance. It was developed by Nobel laureate William F. Sharpe and is calculated by subtracting the risk-free rate of return from the expected return of an investment, and then dividing the result by the standard deviation of the investment's returns.
The Sharpe ratio is used to evaluate the performance of an investment by taking into account both the return and the risk of the investment. A higher Sharpe ratio indicates that an investment has provided a higher return for the amount of risk taken, while a lower Sharpe ratio indicates that an investment has provided a lower return for the amount of risk taken.
The Sharpe ratio is often used by investors to compare the performance of different investments or to evaluate the performance of a portfolio. However, it is important to note that the Sharpe ratio is just one measure of risk-adjusted return and should be used in conjunction with other measures and analysis when making investment decisions.