About the Sharpe Ratio Calculator
This Sharpe ratio calculator measures how much return an investment earned for each unit of risk it took. Paste a list of monthly, weekly, daily or yearly returns and it annualizes the average return and standard deviation, subtracts the risk-free rate and returns both the Sharpe ratio and the Sortino ratio, which only penalizes downside volatility. If you already know the annual figures, switch to summary mode and type them in directly.
Use it to compare funds, ETFs, trading strategies or your own portfolio on equal footing: a fund that returned 12% with wild swings can score worse than one that returned 9% smoothly. Fund fact sheets, backtests and broker statements are all good sources for the returns you need.
Returns are annualized with the common convention — mean × periods per year and standard deviation × √periods per year — and the sample standard deviation is used. The Sortino ratio uses the risk-free rate as its minimum acceptable return. Ratios from fewer than about 24 observations are noisy, so treat short histories with caution.
With the default inputs, the sharpe ratio (annualized) is 1.03. Change any value above to recalculate instantly.
How to use the sharpe ratio calculator
- 1Choose whether you have a list of returns or just the annual return and volatility.
- 2Paste periodic returns in percent and pick how often they were measured.
- 3Enter the risk-free rate, such as the current 3-month Treasury bill yield.
- 4Read the Sharpe ratio; above 1 is generally good, above 2 very good.
- 5Compare the Sortino ratio to see whether volatility is mostly downside or upside.
Formula and method
The Sharpe ratio divides the portfolio’s excess return — annualized return Rp minus the risk-free rate Rf — by its annualized standard deviation σp. From a list of periodic returns, the mean return is multiplied by the number of periods per year N, and the sample standard deviation is multiplied by √N, the standard square-root-of-time scaling.
The Sortino ratio uses the same numerator but divides by the downside deviation σd: the root-mean-square of only the shortfalls below the minimum acceptable return (here the per-period risk-free rate), counted over all periods and annualized by √N. Because upside surprises are not penalized, Sortino is usually higher than Sharpe for positively skewed returns.
- Rp
- Annualized portfolio return
- Rf
- Annual risk-free rate
- σp
- Annualized standard deviation of returns
- σd
- Annualized downside deviation below the risk-free rate
- N
- Return periods per year (12 for monthly, 252 for daily)
Worked examples
Twelve monthly returns
The twelve monthly returns average 0.908%, or 10.9% a year, with a monthly standard deviation of 1.93% (6.68% annualized). Subtracting the 4% risk-free rate leaves 6.9% excess return, so Sharpe = 6.9 ÷ 6.68 ≈ 1.03. Downside deviation is only 3.79%, giving a Sortino ratio of about 1.82.
Fund fact-sheet figures
A fund returning 10% with 15% volatility beats a 4% risk-free rate by 6 points. Sharpe = 6 ÷ 15 = 0.40 and, with 9% downside deviation, Sortino = 6 ÷ 9 ≈ 0.67 — a modest reward for the risk taken.
Sixteen weekly strategy returns
Weekly returns averaging 0.325% annualize to 16.9% (× 52), and the 0.716% weekly standard deviation annualizes to 5.16% (× √52). The excess return of 12.4% over a 4.5% risk-free rate gives a Sharpe of about 2.40 — impressive, but based on only 16 weeks.
Frequently asked questions
What is a good Sharpe ratio?+
As a rule of thumb, a Sharpe ratio below 1 is considered sub-par, 1 to 2 good, 2 to 3 very good and above 3 excellent. Broad stock indexes have historically delivered long-run Sharpe ratios well below 1, so a consistently higher figure is hard to achieve.
What is the difference between the Sharpe and Sortino ratio?+
Both divide excess return by a measure of risk. Sharpe uses total standard deviation, so large gains count as risk too. Sortino uses downside deviation, which only counts returns below a minimum acceptable return, making it fairer for strategies with big upside moves.
How do you annualize a Sharpe ratio from monthly data?+
Multiply the average monthly excess return by 12 and the monthly standard deviation by √12, then divide. Equivalently, multiply the monthly Sharpe ratio by √12 ≈ 3.46. For daily data use 252 trading days and √252.
What risk-free rate should I use?+
Use the yield on a short-dated government bill in the same currency as the returns, such as the 3-month US Treasury bill for dollar portfolios, averaged over the same period as the returns if rates changed a lot.
Can a Sharpe ratio be negative?+
Yes. A negative Sharpe ratio means the investment returned less than the risk-free rate, so you would have done better holding cash-like assets. When comparing negative values, the ranking is less meaningful because more volatility makes the ratio look less negative.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.