Sharpe Ratio Calculator

Calculate the Sharpe Ratio to measure risk-adjusted returns and evaluate investment performance relative to volatility.

✓ Risk-Adjusted Returns ✓ Volatility Analysis ✓ Performance Comparison

Sharpe Ratio Calculator

Input Method

Return Data

Expected or historical average return

Volatility of returns

Treasury bill or bond rate

Analysis Options

Sharpe Ratio Formula

Risk-adjusted return calculation

Formula:

Sharpe Ratio = (Return - Risk-Free Rate) / Standard Deviation
Higher values indicate better risk-adjusted performance

Quick Examples

Growth Stock
15% return, 20% volatility
Balanced Portfolio
10% return, 12% volatility
Historical Data
Use sample monthly returns

Interpretation Guide

Excellent: > 2.0 (Outstanding)
Very Good: 1.0 - 2.0 (Good risk-adjusted returns)
Adequate: 0.5 - 1.0 (Acceptable performance)
Poor: < 0.5 (Sub-optimal risk-return)

Related Metrics

📊 Treynor Ratio: Return per unit of systematic risk
📈 Information Ratio: Active return vs tracking error
⚖️ Sortino Ratio: Downside deviation focus
🎯 Calmar Ratio: Return vs maximum drawdown
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Understanding Sharpe Ratio

The Sharpe Ratio measures risk-adjusted returns by comparing excess return to volatility, helping investors evaluate performance relative to risk taken.

  • Risk-Adjusted Performance: Return per unit of risk
  • Volatility Consideration: Accounts for investment volatility
  • Comparative Analysis: Compare different investments
  • Portfolio Optimization: Build efficient portfolios

Applications

Investment Selection

Choose investments with better risk-adjusted returns.

Portfolio Management

Optimize portfolio allocation for risk-return efficiency.

Performance Evaluation

Assess fund manager or strategy performance.

Risk Management

Understand risk-return trade-offs in investments.