Sharpe Ratio Calculator
Compare two investments fairly by dividing excess return by volatility.
Sharpe Ratio
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Frequently Asked Questions
What is a good Sharpe ratio?
Generally above 1.0 is decent, above 2.0 is excellent, and below 0.5 is weak after accounting for risk.
Can Sharpe be negative?
Yes — when the investment returns less than the risk-free rate, meaning you were not compensated for the risk taken.
What is the main limitation?
It assumes returns are normally distributed and penalizes both upside and downside volatility equally.
Worked Examples
Fund A: 12% return, 15% vol, rf 4%
Sharpe = (12−4)/15 = 0.53.
Fund B: 10% return, 8% vol, rf 4%
Sharpe = (10−4)/8 = 0.75 — better risk-adjusted despite lower return.
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⚠️ Disclaimer
Educational tool only. Outputs are illustrative estimates, not financial advice. Investing involves risk including loss of capital.