The Sharpe ratio, one of the classic indicators for measuring risk and return.

For every unit of risk taken, how much excess return can be earned.

It can be simply understood as how much risk is taken to earn how much money.

The ultimate goal is to earn the most money with the least amount of risk.

The higher the Sharpe ratio, the higher the excess return obtained under fixed risk.

It is generally believed in the industry that a Sharpe ratio greater than 1.5 is considered optimal.