Sharpe Ratio Calculator

What Your Sharpe Ratio Means

The Sharpe Ratio shows how much excess return your portfolio generated for each unit of volatility. A higher number means more return relative to the price swings you experienced.

Interpretation depends on context — asset class, time period, market regime, and the risk-free rate all affect the result. For the formula, worked examples, and the role of the risk-free rate, see Sharpe Ratio Explained. For exactly how this calculator computes each value — rolling windows, annualization, and risk-free handling — see the Sharpe Ratio Calculator guide.

What Is a Good Sharpe Ratio?

A common rule of thumb says a Sharpe Ratio above 1 is good, above 2 is very good, and above 3 is excellent. This framing is easy to remember but often misleading. There is no universal threshold that works across all assets, strategies, and market regimes — a Sharpe Ratio that looks strong for an individual stock may be ordinary for a diversified portfolio.

A better approach is to compare your result against broad market benchmarks and a distribution of similar portfolios.

Market Baselines

Based on the trailing 10-year period, PortfoliosLab estimates the Sharpe Ratio of major market benchmarks as follows:

• S&P 500 (10Y): 0.75
• Nasdaq-100 (10Y): 0.93

The S&P 500 is a broad U.S. equity proxy; the Nasdaq-100 is concentrated in large growth and technology companies. Their risk profiles differ, so they can produce materially different Sharpe Ratios over the same period.

If your portfolio's Sharpe Ratio is above these benchmarks over the same period, it suggests stronger historical risk-adjusted performance. If it is below, the portfolio may still be valuable — diversification, income, or downside protection are not captured by Sharpe alone.

Sharpe Ratio Benchmarks

Based on thousands of portfolios and securities tracked on PortfoliosLab, here is how trailing 1-year Sharpe Ratios distribute across the universe.

Portfolios (1Y)

• Median: 2.21
• 75th percentile: 2.57
• 99th percentile: 6.19

A typical portfolio has a Sharpe Ratio around 2.21. Portfolios above 2.57 rank in the top quartile. Only about 1% exceed 6.19, which shows how uncommon very high Sharpe Ratios are in real-world data.

Stocks (1Y)

• Median: 0.21
• 75th percentile: 1.12
• 99th percentile: 5.60

Individual stocks often have lower Sharpe Ratios than diversified portfolios because company-specific risk creates larger price swings. Values above 5.60 are rare and difficult to sustain over long periods.

ETFs (1Y)

• Median: 1.67
• 75th percentile: 2.30
• 99th percentile: 7.56

ETFs typically have more stable Sharpe Ratios than individual stocks because they hold diversified baskets of securities. An ETF above 2.30 ranks in the top quartile of the ETF universe tracked by PortfoliosLab.

Rather than asking whether your Sharpe Ratio passes a fixed threshold, compare it with similar assets. A result above the median suggests stronger risk-adjusted performance than most observations in the dataset — but review it together with total return, maximum drawdown, and portfolio composition.

How to Improve Your Sharpe Ratio

Improving the Sharpe Ratio means increasing returns without adding proportional volatility, or reducing volatility while preserving returns. Common approaches:

• Improve diversification. Combining assets with low or negative correlation can reduce portfolio volatility. Run a diversification analysis to find concentration risks.
• Reduce concentrated positions. Large single-stock or sector bets often lower risk-adjusted returns.
• Add defensive assets. Bonds, low-volatility ETFs, or cash-like instruments may help smooth returns.
• Rebalance periodically. Rebalancing prevents one asset from dominating portfolio risk.
• Optimize allocation. The Portfolio Optimizer can test allocations that historically improved risk-adjusted returns.

A higher backtested Sharpe Ratio does not guarantee future performance.

Beyond the Sharpe Ratio

The Sharpe Ratio treats upside and downside volatility equally, can look attractive for investments with smooth returns or short track records, and does not show the size of losses during market stress.

For a complete picture, review your Sharpe alongside other risk-adjusted metrics:

• Sortino Ratio — focuses only on downside volatility.
• Treynor Ratio — measures excess return relative to market beta.
• Omega Ratio — compares gains and losses across the full return distribution.

For a deeper explanation of when each metric is most useful, see the Sharpe Ratio guide and the Sortino vs Sharpe comparison.