to measure this risk/return ratio, and it has been one of the most used investment coefficients since then. Next, we discuss how to calculate and interpret the Sharpe ratio. The components of Sharpe's relationship Much of the fame of Sharpe's relationship is attributable to its simplicity since it comprises only three components. The formula is as follows: Sharpe Ratio = (Rx - Rf) รท Standard Deviation (Rx) Where: Rx = average rate of return on investment X Rf = risk free rate