Sharpe Ratio Calculator
The Sharpe ratio is excess return per unit of risk: 12 % return, 4 % risk-free and 15 % volatility give a Sharpe ratio of 0.53333.
0.533333333333333
Full answer, then cut to fewer decimals (not rounded):
- 0.533333333333333
- 0.53333333333333
- 0.5333333333333
- 0.533333333333
- 0.53333333333
- 0.5333333333
- 0.533333333
- 0.53333333
- 0.5333333
- 0.533333
- 0.53333
- 0.5333
- 0.533
- 0.53
- 0.5
- Excess return Rp − Rf
- 8 %
Step-by-step solution
- Sharpe ratio = (Rp − Rf) ÷ σp
- Sharpe ratio = (12 % − 4 %) ÷ 15 % = 0.53333
Sharpe Ratio Formula
Sharpe = (Rp − Rf) ÷ σp
Rp portfolio return, Rf risk-free rate, σp standard deviation of returns
Worked Example
A portfolio returning 12 % with 15 % volatility and a 4 % risk-free rate:
- Sharpe ratio = (Rp − Rf) ÷ σp
- Sharpe ratio = (12 % − 4 %) ÷ 15 % = 0.53333
Interpreting the Sharpe ratio
The Sharpe ratio is excess return per unit of total risk: (Rp − Rf) ÷ σp. Use returns and standard deviation over the same period, and annualise both consistently (multiply monthly excess return by 12 and monthly σ by √12). Above 1 is generally considered good and above 2 very good. It assumes returns are roughly normal, so strategies with rare large losses can look better than they are.
Frequently asked questions
What is a good Sharpe ratio?
Higher is better. As a rough guide, below 1 is modest, 1 to 2 is good and above 2 is very good, but only compare ratios measured over the same period and frequency.
How do I annualise a Sharpe ratio from monthly data?
Multiply the monthly Sharpe ratio by √12 (or annualise the return and volatility first). This assumes returns are independent from month to month.
What is the difference between Sharpe and Sortino ratios?
Sortino divides by downside deviation only, so it does not penalise upside volatility.
Sources
Last reviewed: . Factors are stored exactly and computed with 50-digit decimal arithmetic. See how we verify conversion factors.
Cite this page
APA
Scientific Converters. (2026, October 15). Sharpe Ratio Calculator. Retrieved October 25, 2026, from https://scientificconverters.com/calculators/sharpe-ratio-calculator/
IEEE
Scientific Converters, "Sharpe Ratio Calculator," scientificconverters.com. Accessed: Oct. 25, 2026. [Online]. Available: https://scientificconverters.com/calculators/sharpe-ratio-calculator/