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How do you calculate the Sharpe ratio for an Alternative investment?
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The Sharpe ratio is the return on investment divided by the standard deviation of the return. In other words, it is a measure of the risk-adjusted performance of an investment. In the case of an alternative investment, the standard deviation of the return is usually calculated by dividing the average return by the number of observations. For example, if an investment returned an average of 20% and had 20 observations, then the standard deviation would be 1%.