Sharpe Ratio Calculator

Calculate the Sharpe ratio to measure risk-adjusted portfolio performance. Compare up to 3 portfolios, compute 1/3/5-year Sharpe, information ratio, and monthly-to-annual conversion.

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Sharpe Ratio
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Excess Return over Rf —
Sharpe Interpretation —
Extended More scenarios, charts & detailed breakdown ▾
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Sharpe Ratio
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Rating —
vs S&P 500 Historical (~0.45) —
Professional Full parameters & maximum detail ▾
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Sharpe by Time Period

1-Year Sharpe Ratio —
3-Year Sharpe Ratio —
5-Year Sharpe Ratio —

Monthly Conversion Check

Monthly→Annual Sharpe (×√12) —

Interpretation

1-Year Rating —
vs S&P 500 (historical ~0.45) —

How to Use This Calculator

  1. Enter your Portfolio Annual Return (actual or expected).
  2. Enter the Risk-Free Rate — use the current 1-year Treasury yield (~4.5% in 2026).
  3. Enter the Annual Standard Deviation of portfolio returns.
  4. Read the Sharpe ratio and interpretation. Use Compare 3 Portfolios to rank strategies.
  5. Switch to Professional for 1/3/5-year Sharpe and monthly-to-annual conversion.

Formula

Sharpe Ratio = (Rp − Rf) / σp

  • Rp = Portfolio return
  • Rf = Risk-free rate
  • σp = Standard deviation of excess returns

Monthly to Annual: Annual Sharpe = Monthly Sharpe × √12

Example

Example: Portfolio return 12%, risk-free rate 4.5%, std dev 15%. Sharpe = (12 − 4.5) / 15 = 0.50 (below average). A fund returning 10% with 8% std dev: Sharpe = (10 − 4.5) / 8 = 0.69 (better risk-adjusted despite lower return).

Frequently Asked Questions

  • The Sharpe ratio measures how much excess return a portfolio generates per unit of risk (standard deviation). Sharpe = (Portfolio Return − Risk-Free Rate) / Standard Deviation. A higher Sharpe means better risk-adjusted performance.
  • Generally: below 0.5 is poor, 0.5–1.0 is below average, 1.0–2.0 is good, 2.0–3.0 is very good, and above 3.0 is excellent. The S&P 500's long-term historical Sharpe is approximately 0.4–0.6.
  • In April 2026, the 1-year U.S. Treasury yield is approximately 4.5%. This is the most common risk-free rate used for Sharpe ratio calculations for US-based investors.
  • Monthly Sharpe = (Monthly Return − Monthly Rf) / Monthly Std Dev. Annual Sharpe = Monthly Sharpe × √12. Note: the √12 annualization assumes returns are independent and identically distributed each month.
  • The Sharpe ratio uses the risk-free rate as the benchmark; the Information Ratio uses a market benchmark (e.g., S&P 500). IR = (Portfolio Return − Benchmark Return) / Tracking Error. IR measures active management skill; an IR above 0.5 is considered good.

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Sources & References (5) ▾
  1. Mutual Fund Performance — William Sharpe (1966) — Journal of Business
  2. CFA Institute — Sharpe Ratio — CFA Institute
  3. Morningstar Risk-Adjusted Return Methodology — Morningstar
  4. Sharpe Ratio — Investopedia — Investopedia
  5. AQR Capital Research — Sharpe Ratio and Portfolio Performance — AQR Capital Management