Ask Paula: How to Optimize Your Investments Along the Efficient Frontier (If You Dare!)
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The Sharp Ratio Compares Volatility to Risk
sharp compares two investments specifically to see, if we add something to our folio, does it really help with a risk adjusted return? The equation that we're working is you take the return you think you're going to get, and you minus out the what's called the risk free return. A lot of the time it's going to be around one. With the sharp ratio, it means you're not adding any real value.
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