Sharpe Ratio Calculator
Estimate risk-adjusted return using portfolio return, risk-free rate and volatility.
How to Use the Sharpe Ratio Calculator
Enter the portfolio return, risk-free rate and portfolio standard deviation for the same period. The calculator subtracts the risk-free rate from the portfolio return and divides the excess return by volatility.
Practical Example
If a portfolio returns 10%, the risk-free rate is 3% and volatility is 12%, the Sharpe ratio is about 0.58.
Factors That Affect the Result
The selected time period, return measurement, volatility estimate, risk-free benchmark and unusual market events can materially change the ratio. Comparisons are most useful when calculated consistently.
Frequently Asked Questions
What does a higher Sharpe ratio mean?
It generally indicates more excess return per unit of measured volatility.
Can the Sharpe ratio be negative?
Yes. It becomes negative when portfolio return is below the risk-free rate.
Is Sharpe ratio enough to judge an investment?
No. It should be considered with drawdowns, liquidity, objectives and other risk measures.