Sharpe Ratio
A ratio developed by Nobel Laureate Bill Sharpe to measure risk-adjusted performance. It is calculated by subtracting the risk-free rate from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. 
Investopedia Commentary
The Sharpe ratio tells us whether the returns of a portfolio are because of smart investment decisions or a result of excess risk. This measurement is very useful because although one portfolio or fund can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been.
A variation of the Sharpe ratio is the Sortino ratio, which removes the effects of upward price movements on standard deviation to instead measure only return against downward price volatility.
Related Links
Determining Risk And The Risk Pyramid
Understanding Volatility Measurements
The Uses And Limits Of Volatility
See also: Jensen's Measure, Portfolio, Risk, Risk-Adjusted Return, Risk-Free Rate of Return, Sortino Ratio, Standard Deviation, Treasury Bill - T-Bill