{"id":223731,"date":"2025-05-12T11:44:59","date_gmt":"2025-05-12T15:44:59","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?post_type=glossary-terms&#038;p=223731"},"modified":"2025-05-12T11:45:02","modified_gmt":"2025-05-12T15:45:02","slug":"ratio-of-performance","status":"publish","type":"glossary-terms","link":"https:\/\/www.interactivebrokers.com\/campus\/glossary-terms\/ratio-of-performance\/","title":{"rendered":"Ratio of Performance"},"content":{"rendered":"\n<p>In the realm of investing, the ratio of performance is a critical metric used to evaluate the effectiveness of an investment or portfolio. These ratios provide investors with insights into how well their investments are performing relative to the risks taken or the benchmarks set. Understanding these ratios is essential for making informed investment decisions and optimizing portfolio management.<\/p>\n\n\n\n<p>One of the most commonly used performance ratios is the Sharpe Ratio. The Sharpe Ratio measures the excess return per unit of risk, where risk is defined as the standard deviation of the investment&#8217;s return.<\/p>\n\n\n\n<p>Another important ratio is the Sortino Ratio, which is similar to the Sharpe Ratio but focuses only on downside risk.<\/p>\n\n\n\n<p>The Treynor Ratio is another performance measure that evaluates returns earned in excess of the risk-free rate per unit of market risk, as measured by beta.<\/p>\n\n\n\n<p>These ratios may assist investors assess the efficiency of their investments, balance risk and return, and make strategic decisions to enhance their financial outcomes.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the realm of investing, the ratio of performance is a critical metric used to evaluate the effectiveness of an investment or portfolio. 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