Sharpe Ratio Table Template
Sharpe Ratio Table Template
This Sharpe ratio table template demonstrates the calculation of the Sharpe ratio (using the arithmetic mean) given the expected portfolio return, risk-free rate, and standard deviation of the portfolio return.
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The Sharpe Ratio (or Sharpe Index) is commonly used to calculate the performance of an investment by adjusting for its risk.
The higher the ratio, the greater the return of portfolio relative to the risk taken, and thus, the better the investment. The ratio can be used to evaluate a single stock or investment, or an entire portfolio.
Sharpe Ratio Formula
Sharpe Ratio = (Rx – Rf) / StdDev Rx
where:
- Rx = Expected portfolio return
- Rf = Risk-free rate of return
- StdDev Rx = Standard deviation of portfolio return / volatility
It’s all about reducing volatility. If an investment had an annual return of only 10% but had zero volatility, it would have an infinite (or undefined) Sharpe Ratio.
Of course, it’s impossible to have zero volatility, even with a government bond (prices go up and down). As volatility increases, the expected return has to go up significantly to compensate for that additional risk.
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Additional Resources
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
The Financial Modeling Certification
Analyst Certification FMVA® Program
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
The Financial Modeling Certification
Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.
A well rounded financial analyst possesses all of the above skills!
Additional Questions & Answers
CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.
In order to become a great financial analyst, here are some more questions and answers for you to discover:
- What is Financial Modeling?
- How Do You Build a DCF Model?
- What is Sensitivity Analysis?
- How Do You Value a Business?
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CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
The Financial Modeling Certification
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