**Sharpe Ratio**

A measure of risk-adjusted return — how much excess return is earned per unit of volatility.

`Sharpe = (mean return − risk-free rate) / standard deviation of returns`

- **> 1.0** — generally considered acceptable
- **> 2.0** — good
- **> 3.0** — excellent

A higher Sharpe ratio means more return per unit of risk taken. Negative values indicate the strategy underperforms the risk-free rate.
