Sharpe Ratio Calculator

e.g., Treasury yield.

Volatility of returns.

Sharpe Ratio Calculator: Risk-Adjusted Returns

Our Sharpe Ratio Calculator measures excess return per unit of risk.

Sharpe Ratio Formula

Sharpe = (Portfolio Return - Risk-Free Rate) / Standard Deviation

Interpretation

SharpeMeaning
< 0Poor (negative excess)
0-1Sub-optimal
1-2Good
2-3Very Good
>3Excellent

Example: 12% Return, 3% Rf, 15% Vol

  • Excess Return: 9%
  • Sharpe: 0.60
  • Interpretation: Sub-optimal

How It's Calculated

Annualized inputs assumed; divide by sqrt(252) for daily, etc.

Pro Tips

  • Target >1
  • Compare similar assets
  • Use with Risk Assessment
  • Negative Sharpe = underperformance

Limitations

  • Assumes normal distribution
  • Punishes upside volatility
  • Short-term sensitive

Conclusion

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