The Sharpe Ratio is one of the most widely used metrics for evaluating investment performance on a risk-adjusted basis.
This calculator helps you quickly measure how much excess return you receive for the volatility you take.
Enter below your portfolio return, risk-free rate, and volatility to calculate the Sharpe Ratio instantly.
The Sharpe Ratio measures the excess return of an investment relative to its risk.
It shows how efficiently an investor is compensated for taking additional volatility.
Sharpe Ratio Formula:
Sharpe Ratio = (Portfolio Return − Risk-Free Rate) / Standard Deviation
Investors use the Sharpe Ratio to compare portfolios, funds, or strategies with different risk profiles.
It allows for objective performance comparison beyond simple returns.
Yes. A negative Sharpe Ratio indicates the investment underperforms the risk-free rate.
Yes. A negative Sharpe Ratio indicates the investment underperforms the risk-free rate.
Not necessarily. It means better compensation for the risk taken.
It works best for portfolios with normally distributed returns and may be less reliable for alternatives.
Understanding the Sharpe Ratio goes beyond a simple calculation. To use it effectively in real-world investment decisions, it is important to understand its assumptions, limitations, and advanced applications.
If you want to deepen your knowledge, explore our detailed guides:
These articles will help you better interpret your Sharpe Ratio results and apply them confidently when comparing portfolios, funds, or investment strategies.
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