Return earned per unit of risk. The Sharpe Ratio Calculator takes portfolio return, risk-free rate, standard deviation of returns (volatility) and returns sharpe ratio plus excess return over risk-free, reading. Results update as you type, and the formula is shown under the result so you can repeat it in your own spreadsheet.
Investment maths is about comparing money at different points in time on a fair basis. Compound rates, discounting and annualised returns let you compare options of different sizes and durations. Use the worked example below to check the maths against your own figures.
How the Sharpe Ratio Calculator works
The Sharpe ratio measures return per unit of risk taken. Above 1 is good, above 2 is excellent; a high return achieved with wild swings scores poorly.
Worked example
With the example values (portfolio return of 14%, risk-free rate of 6%, standard deviation of returns (volatility) of 18%), the sharpe ratio is 0.44; excess return over risk-free 8%, reading Weak risk-adjusted return. Change any figure above and the result updates immediately; use Copy results to paste the summary into a note or email.
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Frequently Asked Questions
How is sharpe ratio calculated?
Sharpe ratio = (return − risk-free rate) ÷ standard deviation of returns.
Which figures do I need?
Portfolio return, risk-free rate, standard deviation of returns (volatility). Take them from the same period and the same set of accounts or reports so the ratio is consistent, and check the example values as a guide to the units expected.
Does the calculator account for taxes and fees?
Only where there is an input for them. For a true net return, add fees and taxes to your inputs or use the stock and crypto profit calculators, which include them.
