Sharpe Ratio Calculator
Measure how much return a portfolio earns per unit of risk taken, so you can compare strategies on quality rather than raw performance. Free and private — nothing leaves your browser.
Sharpe Ratio
Are returns worth the risk?
How it works
Sharpe = (Portfolio Return − Risk-Free Rate) / Volatility (standard deviation)Raw returns hide how bumpy the ride was. The Sharpe ratio first subtracts the risk-free rate — the return available for taking no risk at all — and then divides the excess by volatility. The result reads as return earned per unit of risk: a portfolio that made 9% smoothly beats one that made 11% with twice the swings, and Sharpe is the number that says so. It is the lingua franca for comparing funds, strategies, and asset allocations.
Worked example
A portfolio returning 11% while government bills yield 4%, with 14% volatility, scores (11 − 4) / 14 = 0.50 — respectable for a long-only equity strategy. A second portfolio returning 9% with only 6% volatility scores 0.83 and is the better risk-adjusted performer despite the lower headline. Leverage the second to equal risk and it would out-earn the first.
Frequently asked questions
What is a good Sharpe ratio?→
Broad equity markets have historically delivered roughly 0.3-0.5 over long periods. Above 1.0 is very good; above 2.0 is exceptional and rare outside short windows or strategies with hidden tail risk. Treat advertised Sharpes above 2 with suspicion.
What risk-free rate should I use?→
The yield on short-term government debt in your currency over the same period as your returns — e.g. 3-month Treasury bills or their eurozone equivalent. Using zero inflates the ratio, which is a common way performance gets oversold.
What are the Sharpe ratio's blind spots?→
Volatility punishes upside and downside equally, and returns are assumed roughly bell-curved — strategies that earn steadily and lose catastrophically (selling options, some credit) can show beautiful Sharpes right up until they don't. Check drawdowns alongside it.
No black boxes — the exact formula is shown above · Last reviewed July 2026