Sharpe Ratio Calculator

Use our free Sharpe ratio calculator to measure the risk-adjusted return of your investment portfolio. Enter the portfolio return, risk-free rate, and standard deviation to calculate the Sharpe ratio.

Financial

Portfolio Return (%)

Risk-Free Rate (%)

Standard Deviation (monthly, %)

Formula

The Sharpe ratio measures the excess return per unit of risk. Developed by Nobel laureate William Sharpe, it helps investors understand how much additional return they receive for the extra volatility they endure.

Sharpe Ratio = (Portfolio Return - Risk-Free Rate) / Standard Deviation

Percentage: The percentage value you want to apply

Number: The original number or value

Result: The calculated result

How It Works

1Enter your portfolio's average return.
2Enter the current risk-free rate (e.g., Treasury yield).
3Enter the standard deviation of your portfolio's returns.
4See the monthly and annualized Sharpe ratio.

Examples

1.5% monthly return, 0.25% risk-free rate, 4% standard deviation

1.Excess return = 1.5% - 0.25% = 1.25%
2.Sharpe = 1.25% / 4% = 0.313
3.Annualized = 0.313 Ã— âˆš12 = 1.083

Result: 0.313

Frequently Asked Questions

A Sharpe ratio above 1 is considered good, above 2 is very good, and above 3 is excellent. Below 1 indicates the return may not justify the risk.

The annualized Sharpe ratio multiplies the monthly ratio by âˆš12, assuming returns are independent. It provides a standardized annual comparison.

Yes, if the portfolio return is less than the risk-free rate, the Sharpe ratio is negative, meaning the investment is not adequately compensated for its risk.

Related Calculators

Alpha Calculator Beta Calculator CAPM Calculator Portfolio Return Calculator Tip Calculator Discount Calculator

Sharpe Ratio Guide

CalculateMe Team

Last updated: 2026-07-16

Frequently Asked Questions

A Sharpe ratio above 1 is considered good, above 2 is very good, and above 3 is excellent. Below 1 indicates the return may not justify the risk.

The annualized Sharpe ratio multiplies the monthly ratio by âˆš12, assuming returns are independent. It provides a standardized annual comparison.

Yes, if the portfolio return is less than the risk-free rate, the Sharpe ratio is negative, meaning the investment is not adequately compensated for its risk.

Sharpe Ratio Calculator

Formula

How It Works

Examples

1.5% monthly return, 0.25% risk-free rate, 4% standard deviation

Frequently Asked Questions

What is a good Sharpe ratio?

What is the difference between monthly and annualized Sharpe?

Can the Sharpe ratio be negative?

Related Calculators

Related Articles

Sharpe Ratio Calculator

Formula

How It Works

Examples

1.5% monthly return, 0.25% risk-free rate, 4% standard deviation

Frequently Asked Questions

What is a good Sharpe ratio?

What is the difference between monthly and annualized Sharpe?

Can the Sharpe ratio be negative?

Related Calculators

Related Articles