Sharpe Ratio Calculator
Measure your strategy's risk-adjusted performance using the Sharpe Ratio. Enter your returns, risk-free rate, and frequency to see your annualized Sharpe Ratio.
Enter periodic returns as percentages (e.g. 1.2 = 1.2%), separated by commas or new lines
Use your benchmark risk-free rate (e.g. T-bills)
Select the frequency of your return data
Enter your return series, risk-free rate, and frequency, then click Calculate Sharpe Ratio to see your risk-adjusted performance metrics.
For educational purposes only. Not financial advice. Read full disclaimer
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Sharpe Ratio Formula
Excess Return = Return - Risk-free Rate
Sharpe (periodic) = Mean Excess Return / Volatility
Sharpe (annual) = Sharpe (periodic) × √(periods per year)
Worked Examples
Example 1: Active Strategy with Moderate Volatility
A trader's strategy produces an annualized return of 12% with a standard deviation of 15%. The current risk-free rate is 2%.
- Excess return = 12% − 2% = 10%
- Sharpe ratio = 10% / 15% = 0.67
- Interpretation: A Sharpe of 0.67 is below 1.0 — the strategy is generating return but taking on a lot of volatility relative to the reward.
Example 2: Consistent Strategy with Lower Volatility
A second strategy returns 10% annually with a much lower standard deviation of 6%, and the same 2% risk-free rate.
- Excess return = 10% − 2% = 8%
- Sharpe ratio = 8% / 6% = 1.33
- Interpretation: Despite lower raw returns, Strategy 2 has a superior Sharpe of 1.33 because it achieves those returns with far less volatility.
How to Use This Calculator
- Enter your periodic returns — paste your returns as comma-separated values (e.g.,
2.1, -0.8, 1.5, 3.2). Each value represents one period. - Set the risk-free rate — enter the annualized risk-free rate (e.g., current T-bill yield). The calculator converts it to match your return frequency.
- Choose your frequency — select daily, weekly, monthly, or annual to tell the calculator how often your returns are measured.
- Click Calculate — the tool computes the annualized Sharpe Ratio, mean excess return, and volatility for your strategy.
Frequently Asked Questions
- What is a good Sharpe ratio?
- A Sharpe ratio above 1.0 is generally considered acceptable, above 2.0 is very good, and above 3.0 is excellent. The S&P 500 has historically produced a Sharpe around 0.5–0.6 over long periods.
- What does a negative Sharpe ratio mean?
- A negative Sharpe ratio means the strategy is underperforming the risk-free rate. You would be better off holding cash or T-bills than running the strategy, since you're taking on risk without being compensated for it.
- What's the difference between Sharpe and Sortino?
- The Sharpe ratio penalizes all volatility — both upside and downside swings. The Sortino ratio only penalizes downside volatility, making it a fairer measure for strategies with large but desirable winning periods.
- What risk-free rate should I use?
- Use the current 3-month or 1-year U.S. Treasury bill yield as a proxy for the risk-free rate. For backtesting historical data, use the T-bill rate that corresponded to each period rather than today's rate.
- Why annualize the Sharpe ratio?
- Annualizing allows apples-to-apples comparison between strategies measured at different frequencies. A monthly Sharpe of 0.30 annualizes to about 1.04, which is much more intuitive to interpret and compare against benchmarks.