Sharpe Ratio Calculator
Calculate the Sharpe ratio to evaluate whether your investment returns adequately compensate for the risk taken.
Sharpe Ratio
0.458
Sharpe Ratio vs Average Annual Return
सूत्र
## The Sharpe Ratio Developed by Nobel laureate William Sharpe, this ratio measures the excess return per unit of total risk. ### Formula **Sharpe Ratio = (Rp - Rf) / Std Dev** Where: - **Rp** = Portfolio return - **Rf** = Risk-free rate (typically T-bill yield) - **Std Dev** = Standard deviation of portfolio returns ### Interpreting Results The higher the Sharpe ratio, the better the risk-adjusted performance. Use it to compare investments, not in isolation. ### Limitations - Assumes returns are normally distributed - Does not distinguish between upside and downside volatility - Sensitive to the time period chosen
हल किया गया उदाहरण
10% average return, 4.5% risk-free rate, 12% volatility.
- 01Excess return = 10% - 4.5% = 5.5%
- 02Sharpe ratio = 5.5% / 12% = 0.458
- 03This is a moderate risk-adjusted return
- 04For comparison, the S&P 500 has a long-run Sharpe near 0.4-0.5
अक्सर पूछे जाने वाले प्रश्न
What risk-free rate should I use?
Use the yield on a 3-month US Treasury bill for short-term analysis, or the 10-year Treasury yield for long-term comparisons. The risk-free rate should match the investment period being evaluated.
Can the Sharpe ratio be negative?
Yes. A negative Sharpe ratio means the investment returned less than the risk-free rate. You would have been better off in Treasury bills with less risk.
How do I calculate standard deviation?
Standard deviation measures the spread of returns around the average. Most brokerage and financial data sites report it. For a fund, check the fund fact sheet or Morningstar page for trailing volatility figures.
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