Sharpe ratio calculator
Paste your returns and a risk-free rate, get the Sharpe ratio, the annualized figure and the Sortino ratio.
One number per period, in time order — separated by commas, spaces or new lines. A % sign is fine; use a point for decimals.
The returns, rates and volatility are example inputs, not market data — use your own. Educational only, not investment advice.
What is the Sharpe ratio?
It is the average return above a benchmark — usually the risk-free rate — divided by the standard deviation of those excess returns: how much extra return you got for each unit of variability. William F. Sharpe defined it in his 1994 article “The Sharpe Ratio” (Journal of Portfolio Management): the historic version is the average of the differences D_t = R_t − R_f divided by their standard deviation, which uses T − 1 in the denominator, as Excel's STDEV does. His own illustration is an excess return of 6% a year with a standard deviation of 15%, a ratio of 0.40. The ratio compares alternatives over the same period; it has no official good or bad threshold.
How do I calculate it from a list of returns?
Subtract the risk-free return from each period's return, take the average of those excess returns and divide by their sample standard deviation. The example in the form has 12 monthly returns (1.8%, −0.9%, 2.4%, 0.6%, −1.5%, 3.1%, 0.2%, −0.4%, 1.1%, 2.0%, −2.2%, 1.4%) and a 2% a year risk-free rate, which is 0.1667% a month when divided by 12. The mean return is 0.6333%, the mean excess return 0.4667% and the sample standard deviation 1.6356%, so the monthly Sharpe ratio is 0.4667 ÷ 1.6356 = 0.2853. These are example numbers, not market data. Enter returns as percentages, one per period, in the same order of time; the risk-free rate is for the same period (or a yearly rate, which the calculator converts).
How is the ratio annualized, and what does that assume?
Multiply the per-period ratio by the square root of the number of periods in a year: √12 = 3.4641 for months, √52 for weeks, √252 for days (a common count of trading days, which is a convention, not a rule), √4 for quarters. In the example 0.2853 × 3.4641 = 0.9884. Sharpe's article gives the reason: if the one-period excess returns add up over T periods and are not correlated, the mean grows T times and the standard deviation √T times, so the ratio grows √T times. He notes it is more complex when returns compound or are serially correlated. The ratio also depends on the length of the measuring period, so compare ratios only when they are annualized the same way. The same article notes the t-statistic of the mean excess return equals the ratio times √T — here 0.9884 for T = 12 (coincidentally the same as the annualized ratio, because T = 12 here as well).
What is the Sortino ratio and how is it different?
The Sortino ratio replaces two things in the Sharpe ratio: the risk-free rate becomes your minimum acceptable return (MAR), and the standard deviation becomes the downside deviation, which counts only returns below the MAR. Downside deviation = √(Σ min(0, R − MAR)² ÷ N), where N is the number of all periods — returns above the MAR contribute zero but stay in the count. Dividing by the number of periods below the MAR instead is a common mistake that overstates the risk. Example: eight annual returns of 17, 15, 23, −5, 12, 9, 13 and −4 with a 0% MAR have a mean of 10% and a downside deviation of √(41 ÷ 8) = 2.264%, so the Sortino ratio is 4.417; dividing by 2 instead of 8 would give 2.209. CFA Institute's overview also cautions that the figure depends on the method and on the data, and that annualizing a downside deviation from discrete returns can overstate the risk; the calculator shows the ×√periods version as an approximation, labelled as such.
What do the risk-free rate and MAR options mean?
The risk-free rate is the return you could have earned without risk over the same period; the calculator does not know today's rates, so you enter one (the field is an example). If you have a yearly rate you can choose to divide it by the number of periods (simple) or to compound it down, (1 + r)^(1/n) − 1; for a 2% yearly rate the monthly figures are 0.1667% and 0.1652%. The minimum acceptable return is used only for the Sortino ratio: use 0% for “not losing money”, the risk-free rate, or any target per period.
What are the limits of the Sharpe ratio?
It summarizes returns with a mean and a standard deviation, so it ignores skew, fat tails and the order of returns, and it treats upside and downside swings alike (which is why the Sortino ratio exists). A short list of returns gives a noisy ratio — use the t-statistic as a reminder. Sharpe also stresses that the ratio ignores correlation: if an investment will be combined with other assets, correlations matter too. Results describe the past period you entered and are not a forecast. This page is educational, not investment advice.
For education only — not investment advice. Past returns do not predict future results, and a high ratio does not make an investment safe. Sources: W. F. Sharpe, “The Sharpe Ratio,” Journal of Portfolio Management, Fall 1994 (author's copy at web.stanford.edu/~wfsharpe); F. A. Sortino and L. N. Price, “Performance Measurement in a Downside Risk Framework,” Journal of Investing 3(3), 1994; D. Kidd, “The Sortino Ratio: Is Downside Risk the Only Risk that Matters?”, CFA Institute, 2012; checked October 7, 2026. Related: the standard deviation calculator, compound interest calculator, CAGR calculator and Black–Scholes calculator. How we check our calculators.