The Sharpe ratio compares excess return with return volatility.
Sharpe Ratio Calculator
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Results
Risk premium
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Sharpe ratio
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Table of Contents
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What is Sharpe Ratio?
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How to Use This Calculator
- Enter or select Return on asset or investment, Risk free return, Standard deviation.
- Check the unit beside each measurement. For a percentage or rate, use the scale and time period stated in the form.
- Choose Calculate, then compare the output with the formula and example below. If you change a value or option, calculate again to update the result.
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Formula Used
Sharpe = (investment return−risk-free return)/standard deviation
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Variables Explained
| Input | What it means |
|---|---|
| Return on asset or investment | Use the measured or stated value for this item, with the unit or category shown beside the field. |
| Risk free return | Use the measured or stated value for this item, with the unit or category shown beside the field. |
| Standard deviation | The spread of individual observations around their mean, in the data’s original units. |
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Worked Example
Return 10%, risk-free rate 2% and volatility 16% give 0.5.
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Why Use This Calculator?
Compare the result with the underlying statement, budget or proposed transaction. It is most useful when every amount uses the same reporting period and the same accounting definition.
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Common Mistakes
- Returns and volatility must use the same period and compatible units.
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Frequently Asked Questions
Should I use monthly or annual figures?
Use one consistent period for every amount and rate in the relationship. If a form specifies an annual rate or a monthly amount, follow that label rather than mixing time periods.
Does the result include fees and tax?
Only the costs and taxes represented by the inputs and formula are included. A real transaction can include other charges, so compare the estimate with the underlying agreement or statement.
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Sources & References
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