Risk-reward ratio

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Risk-reward ratio

Relationship of substantial reward corresponding to the amount of risk taken; mathematically represented by dividing the expected return by the standard deviation.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Risk-Reward Ratio

The ratio of the standard deviation of an investment to its expected return. The higher the ratio is, the lower the return for the amount of risk one is taking. This can inform one's investment decisions. See also: Risk adjusted return on capital.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved