Measure how much return a portfolio earns for each unit of risk. Enter an annual return, risk-free rate and standard deviation, or paste a list of daily, weekly, monthly or yearly returns and the calculator works out the volatility, annualized Sharpe ratio and Sortino ratio for you.
Last updated:
Input method
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Often the 3-month Treasury bill yield.
Enter your values to see the result.
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How to use the Sharpe Ratio Calculator
Choose the input method: a list of periodic returns, or a known return and standard deviation.
Paste your returns in percent (e.g. 1.2, -0.8, 2.5) and pick their frequency, or type the annual return and volatility.
Enter the risk-free rate, typically the current Treasury bill yield.
Read the Sharpe ratio and, when available, the Sortino ratio.
Check the steps and table to see the mean, volatility and downside deviation behind the result.
Sharpe and Sortino formulas
Sharpe ratio = (Rp − Rf) ÷ σp
Sortino ratio = (Rp − T) ÷ σd, where σd = √(Σ min(0, r − T)² ÷ n)
Annualizing periodic data: annual return ≈ mean × p, annual volatility = σ × √p, annual Sharpe = periodic Sharpe × √p (p = periods per year)
Rp is the portfolio return, Rf the risk-free rate, σp the standard deviation of returns and T the target (minimum acceptable) return.
Annualization factors
Return frequency
Periods per year (p)
√p (Sharpe and volatility multiplier)
Daily (trading days)
252
15.87
Weekly
52
7.21
Monthly
12
3.46
Quarterly
4
2.00
Yearly
1
1.00
Interpreting the Sharpe ratio
Sharpe ratio
Common reading
Below 0
Return was lower than the risk-free rate
0 – 1
Positive but modest reward for the risk taken
1 – 2
Good
2 – 3
Very good
3 and above
Excellent, or a sign the sample is too short
The Sharpe ratio assumes returns are roughly normally distributed and uses past data; it does not predict future performance.
Frequently asked questions
What is the Sharpe ratio formula?
Sharpe ratio = (portfolio return − risk-free rate) ÷ standard deviation of the portfolio's returns. It shows the excess return earned per unit of total volatility. With an 11% return, a 4% risk-free rate and 15% volatility, the Sharpe ratio is (11 − 4) ÷ 15 = 0.47.
How do you annualize a Sharpe ratio from monthly returns?
Compute the Sharpe ratio on the periodic data (mean excess return ÷ standard deviation) and multiply by the square root of the number of periods per year: √12 for monthly, √52 for weekly and √252 for daily returns. This assumes returns are independent from period to period.
What is a good Sharpe ratio?
As a rough guide, below 1 is modest, 1 to 2 is considered good, 2 to 3 very good and above 3 excellent. Long-run broad stock market Sharpe ratios have often been well under 1. Very high values from a short history should be treated with suspicion.
What is the difference between the Sharpe and Sortino ratios?
The Sharpe ratio divides by total volatility, so large gains count as risk too. The Sortino ratio divides by downside deviation, which only counts returns below a target (here the risk-free rate or 0%). Strategies with big upside swings look better on Sortino.
How is downside deviation calculated here?
For each period the shortfall below the target is min(0, return − target). Square the shortfalls, average them over all periods, and take the square root. Periods above the target count as zero. The result is then annualized with the same square-root-of-time rule.
Which standard deviation does the calculator use?
In list mode it uses the sample standard deviation (dividing by n − 1), which is standard for estimating volatility from historical returns. In summary mode it uses the value you enter.
Can the Sharpe ratio be negative?
Yes. If the portfolio returned less than the risk-free rate, the excess return is negative and so is the ratio. Comparing negative Sharpe ratios is tricky, because higher volatility makes a negative ratio look less bad.
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