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Sharpe Ratio Calculator

One return per period, in percent. Commas, spaces or new lines separate.

Sets the annualization factor, the square root of the periods a year.

%

Quoted annually, divided by the period count. That is the convention paired with an arithmetic mean.

Sharpe ratio, annualized
0.770.222 per period, times the square root of 12. Ex-post, on 12 observations
Excess return, annualized
6.20%
Volatility, annualized
8.05%
Mean excess, per period
0.5167%
Risk-free, per period
0.3750%
% per period
  • Mean excess return, the ratio's numerator

Hypothetical illustration, computed only from the series entered. Ex-post: it measures a past record and projects nothing.

The standard deviation uses the n minus 1 sample denominator. Annualizing by the square root of the period count assumes the period returns are independent and identically distributed; serial correlation, a short sample, or fat tails break that assumption in either direction. The ratio treats upside and downside swings alike.

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What this does

The Sharpe ratio divides the return a portfolio earned above the risk-free rate by how much that return bounced around. Two portfolios can finish the year in the same place; the one that got there with smaller swings has the higher ratio. It measures a record that already happened.

Worked example

Twelve monthly returns averaging 0.75% a month, against a 4.5% annual risk-free rate, leave about 0.375% a month in excess return. If those returns have a standard deviation of 2.4%, the monthly ratio is about 0.16, and multiplying by the square root of 12 annualizes it to about 0.54.

Mistake it prevents

Annualizing with the wrong periodicity. The factor is the square root of the number of periods in a year, so labelling a monthly series as daily multiplies the answer by roughly 4.6.