The Sharpe Ratio is one of the most widely used metrics in portfolio evaluation. It is calculated by subtracting the risk-free rate (like government bond yields) from the portfolio return, then dividing by the portfolio's standard deviation. A higher Sharpe Ratio indicates more return per unit of risk. It is essential in comparing managers or strategies with similar absolute returns but different volatility profiles. For market neutral, systematic, or quantitative strategies, a strong Sharpe Ratio can indicate skill in alpha generation while controlling drawdown and beta exposure.