Sharpe Ratio Calculator

Measure risk-adjusted return, from summary figures or a return series.

Please note: Trading carries substantial risk of loss. These calculators are planning tools, not trading advice, and no position sizing method prevents losses.

What the Sharpe Ratio Calculator does

The Sharpe ratio divides return above the risk-free rate by the volatility taken to earn it, giving reward per unit of risk. It is the standard measure for comparing strategies with different risk profiles on equal terms.

Formula

Sharpe = (Portfolio return − Risk-free rate) ÷ Standard deviation
Annualised = Sharpe per period × √Periods per year
Sortino = Excess return ÷ Downside deviation

Inputs explained

Input	Unit	Required	Notes
Calculate from	one of 2 options	Yes	—
Portfolio return	%	In some modes	Shown Calculate from is Return, risk-free rate and volatility.
Standard deviation of returns	%	In some modes	Shown Calculate from is Return, risk-free rate and volatility.
Downside deviation	%	Optional	For the Sortino ratio. Leave at 0 to skip. Shown Calculate from is Return, risk-free rate and volatility.
Periodic returns	text	In some modes	Percentages, one per period. Shown Calculate from is A series of periodic returns.
Risk-free rate	%	Yes	Over the same period as the returns.
Periods per year	one of 5 options	Yes	—

How to use it

Choose Calculate from and Periods per year.
Enter Risk-free rate.
Fill in the remaining inputs the form shows for your choice.
Select Calculate.

Worked example

A portfolio returning 12% with 15% volatility against a 3% risk-free rate.

Return: 12%
Volatility: 15%
Risk-free: 3%

(12 − 3) ÷ 15 = 0.6 — sub-par, meaning the portfolio earned only 0.6% of excess return for each 1% of volatility endured.

Frequently asked questions

What is a good Sharpe ratio?

Above 1 is good, above 2 very good. Long-run equity indices sit near 0.4 to 0.5, so anything consistently above 2 deserves scrutiny before it deserves capital.

When is Sortino better than Sharpe?

When the strategy has deliberately asymmetric returns. Sharpe punishes a large gain exactly as much as a large loss; Sortino only counts the downside.

Method and sources

Method. Excess return over the risk-free rate divided by the standard deviation of returns, annualised by the square root of the number of periods per year.

Assumptions

Returns are independent between periods and adequately described by their mean and standard deviation.
The risk-free rate entered matches the currency and horizon of the returns.

Limitations

Standard deviation penalises upside and downside equally, so a strategy with occasional large gains is scored as though those were a defect.
The measure understates the risk of strategies whose returns are skewed or fat-tailed — selling options being the classic case, which can post an excellent Sharpe until the loss arrives.
Annualising by √n assumes independence between periods. Where returns trend or mean-revert, the annualised figure is overstated.

Sources

The Sharpe Ratio — The Journal of Portfolio Management 21(1):49–58 (William F. Sharpe), 1994. The excess-return-over-volatility definition, and the author's own account of what it does and does not measure.