Free Risk-Adjusted Return Calculator
Measure investment performance relative to the risk taken using the Sharpe and Sortino ratios.
Sharpe Ratio
0.53
Sharpe Ratio vs Risk-Free Rate
Risk-Adjusted Performance
Raw returns do not tell the full story. A 15% return with 30% volatility may be worse than 10% with 10% volatility.
Sharpe Ratio
Sharpe = (Portfolio Return - Risk-Free Rate) / Standard Deviation
Sortino Ratio
Sortino = (Portfolio Return - Risk-Free Rate) / Downside Deviation
The Sortino ratio only penalizes downside volatility, which is more relevant since investors do not mind upside surprises.
Example Calculation
12% return, 4% risk-free rate, 15% volatility, 10% downside deviation.
- 01Excess return = 12% - 4% = 8%
- 02Sharpe ratio = 8% / 15% = 0.53
- 03Sortino ratio = 8% / 10% = 0.80
- 04The Sortino is higher because downside deviation < total volatility
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