This Sharpe ratio calculator template demonstrates the calculation of the Sharpe ratio (using the arithmetic mean) to determine an investment’s performance relative to risk.
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Sharpe Ratio Calculator
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The Sharpe ratio is commonly used as a means of calculating the performance of an investment after adjusting for its risk. This allows investments of different risk profiles to be compared against each other.
In the Sharpe Ratio, a higher value means greater returns for the portfolio relative to the inherent risk. This also means a better investment. Because of the simplicity of the formula, the Sharpe Ratio can be used to evaluate a single stock or an entirely diversified portfolio.
Sharpe Ratio formula
Sharpe Ratio = (Rx – Rf) / StdDev Rx
Rx = Expected portfolio return
Rf = Risk-free rate of return
StdDev Rx = Standard deviation of portfolio return / volatility
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