Answer: Sharpe ratio

The **Sharpe ratio** is the correct choice because it accounts for total risk, which is relevant for an investor holding a portfolio that is not fully diversified. In such cases, the Sharpe ratio and M2 are appropriate performance measures, as they incorporate total risk. - **Option B (Treynor ratio)** and **Option C (Jensen's alpha)** are incorrect because these measures are based on beta risk and are more suitable for well-diversified portfolios with negligible diversifiable risk.

Author: LeetQuiz Editorial Team