SharpeRatio, also known as Sharp Index, is a standardized index for fund performance evaluation. Sharp ratio is one of the three classic indicators that comprehensively consider income and risk. There is a conventional characteristic in investment, that is, the higher the expected return of the investment target, the higher the fluctuation risk that investors can tolerate; Conversely, the lower the expected return, the lower the risk of fluctuation. Therefore, the main purposes of rational investors in choosing investment objects and portfolios are: to maximize returns under the condition of fixed risks; Or pursue the lowest risk under the fixed expected return.

For example, if there are two funds A and B, the average annual net growth rate of Fund A is 20%, the standard deviation is 10%, the average annual net growth rate of Fund B is 15%, the standard deviation is 5%, and the average annual risk-free interest rate is 5%, then the Sharp ratios of Fund A and Fund B are 1.5 and 2, respectively. Then the standard deviation of B will increase by 1 times, reaching the same level as A, but the net growth rate of B is equal to 25% (that is, 2 * 15%). More commonly used are monthly Sharp ratio and annual Sharp ratio.

Investors can realize that funds are also cost-effective through Sharp ratio, which can help investors choose funds with higher returns under the same fluctuation, so as to achieve the effect of giving consideration to both risks and returns.