Investment & trading encyclopedia

Understand investment products, market mechanics, indicators and research terminology. Each entry includes an explanation, example, cautions and related learning.

80 explained termsView all courses

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Portfolio & riskIntermediate

Sharpe Ratio

The Sharpe ratio measures a portfolio's average return above the risk-free rate per unit of total volatility. It was introduced by William Sharpe to compare risk-adjusted performance across strategies.

Portfolio & riskAdvanced

Sortino Ratio

The Sortino ratio is a variation of the Sharpe ratio that divides excess return by downside deviation, which counts only returns below a chosen minimum acceptable return (MAR). It penalizes harmful volatility rather than all volatility.