Sharpe Ratio Calculator
Calculate risk-adjusted returns to measure portfolio performance efficiency
Portfolio Analysis
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Enter portfolio data to calculate Sharpe Ratio and analyze risk-adjusted performance.
How to Use the Sharpe Ratio Calculator
Enter Portfolio Information
Start by entering your portfolio's expected annual return as a percentage. This should be based on historical performance or projected returns.
Input Risk-Free Rate
Enter the current risk-free rate, typically the yield on 10-year government bonds. This represents the return you could earn with zero risk.
Add Portfolio Volatility
Enter your portfolio's standard deviation (volatility). This measures how much your returns vary from the average return.
Optional Market Benchmark
Optionally add market return and volatility data to compare your portfolio's risk-adjusted performance against a market benchmark.
Analyze Performance Results
Review the calculated Sharpe Ratio and performance rating. Higher ratios indicate better risk-adjusted performance.
Sharpe Ratio Analysis Tips
Sharpe Ratio above 2.0 is considered excellent, indicating very strong risk-adjusted returns
Ratios between 1.0-2.0 are good, showing decent compensation for risk taken
Ratios between 0.5-1.0 are acceptable but suggest room for improvement in risk management
Negative Sharpe Ratios indicate the portfolio underperformed the risk-free rate
Use at least 3 years of historical data for reliable Sharpe Ratio calculations
Compare Sharpe Ratios within similar asset classes or investment strategies for meaningful analysis
Consider the Sharpe Ratio alongside other metrics like Sortino ratio and maximum drawdown
Higher risk-free rates make it harder to achieve high Sharpe Ratios, so consider the interest rate environment
Sharpe Ratio assumes returns follow a normal distribution, which may not always be accurate
Use Sharpe Ratio for portfolio optimization - combine assets to maximize the overall ratio