Sharpe Ratio Calculator: Measure Risk-Adjusted Returns

Investors don’t just care about returns—they care about risk-adjusted returns. The Sharpe Ratio is a key metric that measures how much return you’re getting for the risk you’re taking.

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Our Sharpe Ratio Calculator allows you to instantly calculate whether your portfolio is efficiently balancing risk and reward.

What is the Sharpe Ratio?

The Sharpe Ratio measures risk-adjusted performance by comparing the excess return of a portfolio over a risk-free rate to the portfolio’s volatility.

Sharpe Ratio Formula: Sharpe Ratio=Portfolio Return−Risk-Free RateStandard Deviation of Portfolio\text{Sharpe Ratio} = \frac{\text{Portfolio Return} – \text{Risk-Free Rate}}{\text{Standard Deviation of Portfolio}}Sharpe Ratio=Standard Deviation of PortfolioPortfolio Return−Risk-Free Rate

Portfolio Return: Expected return of your investment.
Risk-Free Rate: Return of a risk-free investment (like government bonds).
Standard Deviation: Volatility of the portfolio’s returns, representing risk.

A higher Sharpe Ratio means better risk-adjusted performance.

How to Use the Sharpe Ratio Calculator

Enter Portfolio Return (%).
Enter Risk-Free Rate (%).
Enter Standard Deviation (%).
Click Calculate.

The calculator shows the Sharpe Ratio and a color-coded indicator:

Sharpe Ratio	Interpretation	Indicator
≥ 1	Excellent: High risk-adjusted return	✅ Green
0.5 – 0.99	Moderate: Acceptable return	⚠️ Orange
< 0.5	Low: Poor risk-adjusted return	❌ Red

Example:

Portfolio Return = 12%
Risk-Free Rate = 6%
Standard Deviation = 5%

Sharpe=12−65=1.2Sharpe = \frac{12 – 6}{5} = 1.2Sharpe=512−6=1.2

✅ Excellent: Your portfolio is generating strong risk-adjusted returns.

Why the Sharpe Ratio Matters

For Investors: Helps compare portfolios based on risk-adjusted returns rather than absolute returns.
For Portfolio Managers: Identify if additional risk is being properly rewarded.
For Analysts: Compare performance across portfolios or funds.

A high Sharpe Ratio indicates efficient use of risk to generate returns.

Key Takeaways

The Sharpe Ratio is a risk-adjusted performance measure.
Higher Sharpe = better risk-reward balance.
Use it alongside other metrics like ROE, ROA, and PEG for a comprehensive portfolio assessment.

Try the Sharpe Ratio Calculator Now

Use our Sharpe Ratio Calculator to quickly analyze whether your portfolio’s returns are worth the risk. Make informed investment decisions by understanding risk-adjusted performance.