Finance & Investment · Risk & Portfolio
Sharpe Ratio Calculator
Calculate the Sharpe ratio — excess return over the risk-free rate per unit of volatility — for one investment or two side by side, to see which one paid you better for the risk you took.
Your inputs
Quick start — try a typical case
Annualised standard deviation, shown in fund factsheets.
Leave 0 to analyse only A.
e.g. the 91-day T-bill yield.
Your result Live
Investment B Has the Better Sharpe Ratio
0.47 vs 0.50
Excess return per unit of volatility
- Investment A
- 0.47 — weak (7.50% over risk-free)
- Investment B
- 0.50 — adequate (4.50% over risk-free)
- B at A's Level of Risk Would Return
- 14.50% vs A's 14.00%
How this is calculated
Sharpe = (Return − Risk-free rate) ÷ Standard deviation
- Return
- Annualised return of the investment
- Standard deviation
- Annualised volatility of its returns
A fund that returns 14 % with wild swings isn't necessarily better than one returning 11 % smoothly. The Sharpe ratio measures the extra return over a risk-free investment for each unit of volatility. Compare it only between investments measured over the same period with the same risk-free rate.
Assumptions & sources
- Returns and volatilities are annualised over the same period.
- Volatility treats upside and downside swings alike — the Sortino Ratio counts only downside.
- 1The Sharpe Ratio (Sharpe, 1994) — Journal of Portfolio Management
- 2Investments (Bodie, Kane & Marcus), chapters on returns, compounding and the time value of money — McGraw-Hill
Calculator ID FIN-RISK-SHARPE-001 · version 1.0.0
Common questions
What is a good Sharpe ratio?
Above 1 is generally good and above 2 very good, but it depends on the asset class and period. Use it mainly to compare similar funds.
Where do I find volatility?
Fund factsheets list the annualised standard deviation, usually over 3 years. For your own data, use a return series in the Sortino Ratio or Beta calculators.