Sharpe Ratio Calculator Template
Sharpe Ratio Calculator Template
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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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
where:
- Rx = Expected portfolio return
- Rf = Risk-free rate of return
- StdDev Rx = Standard deviation of portfolio return / volatility
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