DEFINITION of 'RiskAdjusted Return'
A concept that refines an investment's return by measuring how much risk is involved in producing that return, which is generally expressed as a number or rating. Riskadjusted returns are applied to individual securities and investment funds and portfolios.
INVESTOPEDIA EXPLAINS 'RiskAdjusted Return'
There are five principal risk measures: alpha, beta, rsquared, standard deviation and the Sharpe ratio. Each risk measure is unique in how it measures risk. When comparing two or more potential investments, an investor should always compare the same risk measures to each different investment in order to get a relative performance perspective.

Sharpe Ratio
A ratio developed by Nobel laureate William F. Sharpe to measure ... 
William F. Sharpe
An American economist who won the 1990 Nobel Prize in Economics, ... 
Terminal Capitalization Rate
A rate used to estimate the resale value of a property at the ... 
Modified Sharpe Ratio
A ratio used to calculate the riskadjusted performance of an ... 
RiskFree Rate Of Return
The theoretical rate of return of an investment with zero risk. ... 
Return
The gain or loss of a security in a particular period. The return ...

How can I use expected return with my risk profile to make an investment decision?
Investors use expected return to evaluate the potential gain or loss resulting from investing capital in a particular security ... Read Full Answer >> 
What is a good Sharpe ratio?
The Sharpe ratio is a wellknown and wellreputed measure of riskadjusted return on investment, developed by William Sharpe. ... Read Full Answer >> 
Are socalled selfoffering and selfmanagement covered by "Financial Instruments ...
As the Financial Services Agency (FSA) explains, selfoffering of interests in collective investment schemes falls under ... Read Full Answer >> 
What is the difference between payment netting and closeout netting?
Both payment netting and closeout netting are methods of settlement between two or more parties, used to reduce risk exposure. ... Read Full Answer >> 
What is the minimum capital adequacy ratio that must be attained under Basel III?
Under Basel III, the minimum capital adequacy ratio that banks must maintain is 8%. The capital adequacy ratio measures a ... Read Full Answer >> 
How is portfolio variance reduced in Modern Portfolio Theory?
According to modern portfolio theory, or MPT, portfolio variance can be reduced by diversifying a portfolio through the inclusion ... Read Full Answer >>

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