Sharpe Ratio Calculator
The Sharpe ratio from a list of periodic returns (or their mean and standard deviation) and the risk-free rate, annualised, with the Sortino ratio from the downside deviation below a target.
Result…
How it's calculated
Sharpe (per period) = (mean return − risk-free rate ÷ k) ÷ standard deviation Annualised Sharpe = Sharpe per period × √k (k = periods per year) Downside deviation = √(Σ min(0, r − target ÷ k)² ÷ n) Sortino = (mean return − target ÷ k) ÷ downside deviation × √k
The Sharpe ratio, set out by William Sharpe, measures how much return above a riskless asset an investment earned for each unit of volatility: the mean excess return divided by the standard deviation of returns. A higher ratio means more reward for the swings taken. The Sortino ratio changes the denominator to the downside deviation, so only returns below a target you choose count as risk, and upside surprises are not penalised. Enter returns for each month, week, day, quarter or year, or their mean and standard deviation directly, and the page shows the working at each step and scales both ratios to a year with the square-root rule. Use enough periods: a ratio from a few returns is mostly noise. It is a way to compare past risk-adjusted performance, not a forecast.
Your numbers, step by step
About the Sharpe Ratio calculator
This Sharpe ratio calculator measures risk-adjusted return: how much an investment earned above a riskless asset for each unit of volatility it carried. Paste a list of monthly, weekly, daily, quarterly or yearly returns, or enter their mean and standard deviation (the standard deviation calculator can find them), add the risk-free rate, and it gives the Sharpe ratio per period and annualised. It also works out the Sortino ratio, which counts only returns below a target you choose as risk, so a fund with big upside swings is not penalised for them. Students, analysts and investors use the pair to compare funds or strategies on the same footing. The working is shown step by step, including the square-root rule used to scale each ratio to a year, which assumes returns are independent from one period to the next. It describes past results, not future ones.
How to use it
- Choose “A list of returns” and paste the “Periodic returns (%)”, oldest first, or choose “Mean and standard deviation” and enter them.
- Pick the “Periods per year” that matches your data, such as “Monthly (12)”.
- Enter the “Risk-free rate (a year)” for your currency and the “Target return for Sortino (a year)”.
- Read the annualised Sharpe and Sortino ratios, then check the steps to see each number used.
Worked example
Twelve monthly returns of 1.2, −0.5, 2.1, 0.8, −1.4, 1.9, 0.6, −0.3, 1.5, 0.9, −0.8 and 1.1% have a mean of about 0.59% and a standard deviation of about 1.11% a month. With a risk-free rate of 3% a year (0.25% a month), the Sharpe ratio per month is (0.5917 − 0.25) ÷ 1.1065 = 0.309, and annualised it is 0.309 × √12 = 1.07. Four of the twelve months are below a 0% target, giving a downside deviation of 1.71% a year and an annualised Sortino ratio of 4.14.
Updated
Questions people ask
What is the formula for the Sharpe ratio?
Sharpe ratio = (mean return − risk-free rate) ÷ standard deviation of returns, all for the same period. William Sharpe sets out the definition on his own page about the ratio.
How do I annualise a monthly Sharpe ratio?
Multiply it by the square root of the periods in a year: √12 for monthly returns, √52 for weekly and √252 for trading days. This rule assumes returns are independent from period to period; if they trend or cluster, the true annual figure differs.
What is the difference between the Sharpe and Sortino ratios?
The Sharpe ratio divides by the standard deviation, so it treats gains and losses as equally risky. The Sortino ratio divides by the downside deviation, which only counts returns below your target, so it rewards strategies whose swings are mostly upward.
What counts as a good Sharpe ratio?
There is no fixed cut-off: the ratio is most useful for comparing investments measured over the same dates, with the same return frequency and the same risk-free rate. A higher ratio means more excess return per unit of volatility over that window.
What is a common mistake with the Sharpe ratio?
Mixing periods, such as monthly returns with a yearly risk-free rate that is not divided by 12. Another is trusting a ratio from only a handful of returns, which is mostly noise.
Can I pick investments with this ratio alone?
No. It is built from past returns and one measure of risk, and ignores fees, taxes, liquidity and how returns behave in a crisis. It is educational, not advice; a licensed financial adviser can help with real decisions.