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Sharpe Ratio Calculator

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✖The Expected Portfolio Return is the combination of the expected returns, or averages of probability distributions of possible returns, of all the assets in an investment portfolio.ⓘ Expected Portfolio Return [R_p]			+10% -10%
✖The Risk Free Rate is the theoretical rate of return of an investment with zero risks.ⓘ Risk Free Rate [R_f]			+10% -10%
✖Portfolio Standard Deviation is a measure of the dispersion of a set of data from its mean.ⓘ Portfolio Standard Deviation [σp]			+10% -10%

✖Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such calculations.ⓘ Sharpe Ratio [SR]

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Sharpe Ratio Solution

STEP 0: Pre-Calculation Summary

Formula Used

Sharpe Ratio = (Expected Portfolio Return-Risk Free Rate)/Portfolio Standard Deviation
SR = (R_p-R_f)/σp
This formula uses 4 Variables

Variables Used

Sharpe Ratio - Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such calculations.
Expected Portfolio Return - The Expected Portfolio Return is the combination of the expected returns, or averages of probability distributions of possible returns, of all the assets in an investment portfolio.
Risk Free Rate - The Risk Free Rate is the theoretical rate of return of an investment with zero risks.
Portfolio Standard Deviation - Portfolio Standard Deviation is a measure of the dispersion of a set of data from its mean.

STEP 1: Convert Input(s) to Base Unit

Expected Portfolio Return: 8 --> No Conversion Required
Risk Free Rate: 3 --> No Conversion Required
Portfolio Standard Deviation: 14 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

SR = (R_p-R_f)/σp --> (8-3)/14

Evaluating ... ...

SR = 0.357142857142857

STEP 3: Convert Result to Output's Unit

0.357142857142857 --> No Conversion Required

FINAL ANSWER

0.357142857142857 ≈ 0.357143 <-- Sharpe Ratio

(Calculation completed in 00.004 seconds)

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< Important Formulas of Investment Calculators

Compound Interest

LaTeX Go Future Value of Investment = Principal Investment Amount*(1+(Annual Interest Rate/Number of Periods))^(Number of Periods*Number of Years Money is Invested)

Certificate of Deposit

LaTeX Go Certificate of Deposit = Initial Deposit Amount*(1+(Annual Nominal Interest Rate/Compounding Periods))^(Compounding Periods*Number of Years)

Capital Gains Yield

LaTeX Go Capital Gains Yield = (Current Stock Price-Initial Stock Price)/Initial Stock Price

Risk Premium

LaTeX Go Risk Premium = Return on Investment (ROI)-Risk Free Return

Sharpe Ratio Formula

LaTeX Go

Sharpe Ratio = (Expected Portfolio Return-Risk Free Rate)/Portfolio Standard Deviation
SR = (R_p-R_f)/σp

Significance of Sharpe Ratio

Sharpe ratio indicates investors’ desire to earn returns which are higher than those provided by risk-free instruments like treasury bills. As Sharpe ratio is based on standard deviation which in turn is a measure of total risk inherent in an investment, Sharpe ratio indicates the degree of returns generated by an investment after taking into account all kinds of risks. It is the most useful ratio to determine the performance of a fund and you, as an investor, need to know its importance.

How to Calculate Sharpe Ratio?

Sharpe Ratio calculator uses Sharpe Ratio = (Expected Portfolio Return-Risk Free Rate)/Portfolio Standard Deviation to calculate the Sharpe Ratio, Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such calculations. Sharpe Ratio is denoted by SR symbol.

How to calculate Sharpe Ratio using this online calculator? To use this online calculator for Sharpe Ratio, enter Expected Portfolio Return (R_p), Risk Free Rate (R_f) & Portfolio Standard Deviation (σp) and hit the calculate button. Here is how the Sharpe Ratio calculation can be explained with given input values -> 0.357143 = (8-3)/14.

FAQ

What is Sharpe Ratio?

Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such calculations and is represented as SR = (R_p-R_f)/σp or Sharpe Ratio = (Expected Portfolio Return-Risk Free Rate)/Portfolio Standard Deviation. The Expected Portfolio Return is the combination of the expected returns, or averages of probability distributions of possible returns, of all the assets in an investment portfolio, The Risk Free Rate is the theoretical rate of return of an investment with zero risks & Portfolio Standard Deviation is a measure of the dispersion of a set of data from its mean.

How to calculate Sharpe Ratio?

Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such calculations is calculated using Sharpe Ratio = (Expected Portfolio Return-Risk Free Rate)/Portfolio Standard Deviation. To calculate Sharpe Ratio, you need Expected Portfolio Return (R_p), Risk Free Rate (R_f) & Portfolio Standard Deviation (σp). With our tool, you need to enter the respective value for Expected Portfolio Return, Risk Free Rate & Portfolio Standard Deviation and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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