What is Sharpe ratio?

The same thing happens with Sharpe ratios. The Sharpe ratio is average return divided by the variability of returns, usually annualised: a measure of return per unit of risk. With two years of daily results, a strategy with zero true edge has a measured annual Sharpe that wanders around zero with a typical spread of about 0.7. The best of 100 such strategies will usually show a Sharpe around 1.7 or higher, purely from noise. On a chart, that looks like a very attractive strategy.