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Sharpe Ratio


Sharpe Ratio is a performance indicator that shows the investment portfolio's efficacy relative to its risk. It helps investors understand whether a higher portfolio's return is due to a higher risk or a result of a better investment decision.

How to Use Sharpe Ratio Calculator

To calculate Sharpe Ratio for your portfolio, enter your holdings below. Alternatively, you can choose one of the predefined lazy portfolios. You can also adjust portfolio rebalance settings and the risk-free rate — a theoretical return rate with zero risks, usually based on the yield on U.S. Treasury securities. After that, click Calculate and get your results.

What the Sharpe Ratio Can Tell You

When comparing funds or portfolios, investors should take into consideration not only absolute returns but also risks. While one portfolio or fund could have higher returns, it is only a good investment if those higher returns do not come with additional risk.

Generally speaking, the higher the Sharpe Ratio, the higher the risk-adjusted performance of the portfolio.

  • A negative Sharpe ratio means that the risk-free rate is higher than the portfolio's return. This value does not convey any meaningful information.
  • A Sharpe ratio between 0 and 1.0 is considered sub-optimal.
  • A Sharpe ratio greater than 1.0 is considered acceptable.
  • A Sharpe ratio higher than 2.0 is considered very good.
  • A Sharpe ratio of 3.0 or higher is considered excellent.

Sharpe Ratio Formula


Sharpe Ratio Formula
Where:
Return of portfolio

 — Return of portfolio

Risk-free rate

 — Risk-free rate

Standard deviation of portfolio excess returns

 — Standard deviation of portfolio excess returns

Portfolio


Your portfolio is empty. Add symbols manually or select an existing portfolio.

Sharpe Ratio Settings


%

Rolling Annualized Sharpe Ratio Chart


Chart placeholderClick Calculate to get results