Sharpe Ratio Calculator

Risk-adjusted return: (mean return − risk-free rate) ÷ standard deviation. Cite Nobel-laureate convention.

Inputs

Annual % returns. 10 years is the typical evaluation window.

Usually the 10-yr US Treasury yield (~4-5% in 2026), or 3-mo T-bill for short-horizon comparisons.

Sharpe convention is annualized; non-annual inputs scale by √(periods/yr).

Result

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How to use this calculator

  • List your portfolio's periodic returns (% each), comma- or space-separated.
  • Pick whether the returns are annual, quarterly, or monthly — the tool annualizes for you.
  • Set the risk-free rate (typically the 10-yr Treasury yield; use ~4-5% for 2026).
  • Compare your Sharpe to a benchmark portfolio (S&P 500 long-run ~0.4-0.6 annual Sharpe).

About this calculator

The Sharpe ratio (William F. Sharpe, 1966; Nobel Prize 1990) measures how much excess return a portfolio earned per unit of total risk. Sharpe = (R_p − R_f) / σ_p, where R_p is portfolio return, R_f is the risk-free rate, and σ_p is the standard deviation of returns. A Sharpe of 0 means you earned exactly the risk-free rate (no compensation for the risk taken). 1.0+ is considered "good"; 2.0+ is "very good"; and anything above 3.0 should make you double-check the math. The ratio is annualized by convention — monthly data scales by √12, quarterly by √4. The Sortino ratio replaces total volatility with downside-only deviation; useful when returns are upside-skewed (e.g., long-volatility strategies). Both ratios depend critically on the sample window — a 3-year window during a bull market overstates the Sharpe of an equity portfolio.

Frequently asked

Why use sample std dev (n−1) instead of population (n)?+
Because we're estimating the unknown population volatility from a finite sample. The n−1 (Bessel's correction) is the unbiased estimator, and is the standard convention in finance (per Sharpe's original 1966 paper and all major textbooks).
What's a "good" Sharpe ratio for a stock portfolio?+
~0.4-0.6 is typical for the S&P 500 over multi-decade windows. > 1.0 is excellent for a long-only equity portfolio. Hedge funds report 1-2 in normal conditions; > 2 sustained is rare and suspicious.
Why √12 for monthly annualization?+
Volatility scales with √time (under the random-walk assumption). Monthly returns over a year are 12 independent draws; their combined std dev is monthly_std × √12. Mean scales linearly (mean × 12).
Sharpe vs Sortino vs Treynor?+
Sharpe uses total volatility. Sortino uses downside-only volatility (good for asymmetric strategies). Treynor uses beta (market-only risk). Use Sharpe as the default; switch to Sortino if your strategy is asymmetric; Treynor for portfolios you want to compare against a benchmark with the same market exposure.
Source?+
Sharpe, W.F. (1966), "Mutual Fund Performance", Journal of Business 39: 119-138. Modern formulation per CFA Institute Curriculum Vol 5 (Portfolio Management). Sortino: Sortino & van der Meer (1991), "Downside Risk", Journal of Portfolio Management.

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