Carl Bacon CIPM, challenges the Sharpe ratio which is sometimes erroneously described as a risk-adjusted return. It is not. The clue is in the name; it’s a ratio.
In this white paper, Carl discusses ranking portfolios in order of preference with the Sharpe ratio but then why it is difficult to judge the size of relative performance. The solution is converting the Sharpe ratio to a metric we are more comfortable using; risk-adjusted return. M2 (M squared) fits the bill.
Download this white paper