Sharpe Ratio Calculator
Compute the Sharpe-style ratio from a per-period mean return, standard deviation, and risk-free rate, annualized by the square root of periods per year.
Calculator
252 daily · 52 weekly · 12 monthly.
Formula
- Period Sharpe = (Mean return − Risk-free) ÷ Standard deviation
- Annualized Sharpe = Period Sharpe × √(Periods per year)
How it works
The Sharpe ratio expresses excess return per unit of volatility — how much return you got for the variability you endured. It is one of the most common single-number summaries of risk-adjusted performance.
Be honest about its assumptions. The √time annualization treats returns as independent and identically distributed, but real returns are autocorrelated and fat-tailed, so the number is an approximation. Standard deviation penalizes upside and downside equally, and the ratio is sensitive to the sampling frequency you choose.
Enter the mean, standard deviation, and risk-free rate in the same units (percent per period). This is a descriptive statistic about numbers you provide — not advice and not a forecast.
Example use cases
Daily returns
0.10% mean, 1.0% std, 0% risk-free, 252 trading days → period Sharpe 0.10, annualized ≈ 1.59.
Monthly returns
0.5% mean, 2% std, 0.1% risk-free, 12 months → period Sharpe 0.20, annualized ≈ 0.69.
Frequently asked questions
What counts as a 'good' Sharpe ratio?+
There is no universal threshold, and chasing one is a trap. A Sharpe figure is only meaningful alongside the sample length, the assumptions behind it, and other risk measures like drawdown. Treat it as one lens, not a verdict.
Why annualize with the square root of time?+
Under the simplifying assumption that returns are independent, variance scales linearly with time, so standard deviation scales with its square root — hence √(periods per year). Real returns violate that assumption, so read the annualized figure as an approximation.