Sharpe Ratio Calculator
Risk-adjusted return: excess return per unit of volatility.
Risk-adjusted investing
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What this measures
The Sharpe ratio (William Sharpe, 1966) measures how much excess return a portfolio earns for each unit of volatility it takes on. A Sharpe of 1.0 is considered acceptable, 2.0 good, 3.0+ excellent. Use it to compare strategies with different risk profiles fairly.
Formula & example
Sharpe = (Portfolio Return − Risk-Free Rate) ÷ Portfolio Standard Deviation. All inputs should use the same period (typically annualized). Use current 3-month T-bill yield for the risk-free rate. Standard deviation of monthly returns × √12 = annualized volatility.
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