How is Sharpe ratio calculated

How is Sharpe ratio calculated?

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Sharpe ratio is calculated as:

Sharpe ratio = (µ − r)/σ

Here µ is the return on the strategy over some given period, r is the risk-free rate over such period and here σ is the standard deviation of returns. This Sharpe ratio will be quoted in annualized conditions. A high Sharpe ratio is intended to be an indication of a good strategy.

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