Sharpe Ratio Calculator
Measure excess return per unit of total volatility with the Sharpe ratio.
Result
Review or adjust your inputs, then calculate to see your results and interpretation.
Understand this calculation
The Sharpe ratio divides return above the risk-free rate by standard deviation. Its sign reflects excess return, not the probability of profit.
See calculation method and assumptions
Formula
Sharpe Ratio
Variables, rates and periods
- S
- Dimensionless Sharpe ratio; historical and assumed inputs have different interpretations.
- Rp
- Portfolio return.
- Rf
- Same-period risk-free rate.
- σp
- Strictly positive same-period return standard deviation; the ratio is undefined at zero.
Historical or assumed inputs
- Historical mean return and standard deviation describe the sample;
- expected return and volatility describe a scenario.
- This tool does not estimate inputs from a price series.
Match periods and reference rates
- All three inputs need matching horizons, currencies, and return definitions.
- Square-root-of-time annualization is justified only under assumptions such as appropriate time independence.
Measure excess return per unit of total volatility with the Sharpe ratio.
Worked example
- Enter return 12%, risk-free rate 3%, and volatility 15% on the same horizon.
- Excess return is 12% − 3% = 9%.
- Sharpe is 9% ÷ 15% = 0.6, a dimensionless ratio.
Frequently asked questions
Does zero standard deviation give infinity?
This tool reports zero standard deviation as undefined, including zero excess return, rather than returning infinity or zero divided by zero.
How should I interpret a negative Sharpe?
Return is below the matching risk-free rate. With negative excess return, more volatility can move the ratio toward zero, so ranking strategies solely by the ratio can mislead.
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