Sharpe Ratio Calculator

Measure return earned per unit of total volatility, the standard risk-adjusted return measure.

About Sharpe Ratio Calculator

The Sharpe ratio divides excess return over the risk-free rate by total volatility, so it penalises upside and downside swings equally. A ratio above 1 is generally considered good and above 2 excellent. Comparing raw returns without adjusting for volatility rewards leverage rather than skill, which is exactly what the Sharpe ratio corrects for.

Formula

Sharpe Ratio

Sharpe Ratio = (portfolio return − risk-free rate) ÷ portfolio standard deviation

excess return: Return earned above what a riskless asset would have paid
Portfolio standard deviation: The risk measure this ratio divides by

Worked example

With the default values below, Sharpe Ratio Calculator returns Sharpe Ratio of 0.583. Change any input above and every figure here is recalculated in your browser.

Inputs used

Portfolio returnaccepts -100–200 %: 11 %
Risk-free rateaccepts 0–30 %: 4 %
Portfolio standard deviationminimum 0.01: 12

Results

Sharpe Ratio: 0.583
Excess Return Over Risk-Free: 7.00%
Interpretation: Positive but below the benchmark of 1.0
Return per Unit of Risk: 0.917
Risk Level That Would Halve the Ratio: 24.00

Step by step

1Values used
2Sharpe Ratio
3Sharpe Ratio= 0.583
4Excess Return Over Risk-Free= 7.00
5Interpretation= Positive but below the benchmark of 1.0
6Return per Unit of Risk= 0.917
7Risk Level That Would Halve the Ratio= 24.00

Assumptions and limits

The result is derived only from the 3 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is Sharpe Ratio calculated?

Sharpe Ratio = (portfolio return − risk-free rate) ÷ portfolio standard deviation The Sharpe ratio divides excess return over the risk-free rate by total volatility, so it penalises upside and downside swings equally. A ratio above 1 is generally considered good and above 2 excellent.

Why does Sharpe Ratio matter?

Comparing raw returns without adjusting for volatility rewards leverage rather than skill, which is exactly what the Sharpe ratio corrects for.

What values do I need to enter?

This calculator takes 3 inputs: Portfolio return, Risk-free rate, Portfolio standard deviation. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.