Knowledge center · Validation & statistics
Sharpe Ratio
Annualized return per unit of total volatility.
Formula
Sharpe = mean(daily return) / std(daily return) × √252
Interpretation
Higher means more return was earned for the risk (volatility) taken on, treating upside and downside swings symmetrically.
What good looks like
Above 1.0 is considered good for a single-name long/flat strategy; above 2.0 is excellent and worth double-checking for overfitting.
What bad looks like
Below 0 means the strategy lost money on a risk-adjusted basis over the period tested.
Typical range
0.3–1.2 for most realistic single-name signal strategies over a multi-year window.
How OmniSignal uses it
The engine's own risk-adjusted verdict (raw score vs. risk-adjusted score) mirrors this idea — Sharpe is the industry-standard way to check that trade-off empirically.
References
Sharpe, W. F. (1966), "Mutual Fund Performance," Journal of Business
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