Which of the following best describes the concept of risk-adjusted return?

Risk-adjusted return is a crucial concept in finance that allows investors to evaluate the performance of an investment relative to the risks associated with it. The idea behind this metric is to provide a clearer picture of how much return an investor is earning for each unit of risk taken, rather than looking at returns in isolation.

This approach helps in comparing different investments with varying risk levels, allowing investors to make informed decisions based on their risk tolerance. For example, if one investment provides a high return but comes with substantial risk, and another investment offers a lower return with minimal risk, risk-adjusted return metrics can clarify which one may be more favorable depending on the investor's goals.

Considering this, the other options do not encapsulate the essence of risk-adjusted return. Simply measuring total investment returns over time does not account for risk levels, so it fails to provide a comprehensive assessment. Similarly, evaluating returns without considering the risks involved lacks the depth needed to make informed investment decisions. Lastly, relying solely on past performance neglects the volatility and uncertainties that can affect future outcomes. Therefore, the metric that assesses returns relative to the risks taken is the most accurate depiction of risk-adjusted return.