Sharpe Ratio Calculator
Sharpe Ratio
Calculate the Sharpe ratio of an investment
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Compare Two Investments
Compare Sharpe ratios of two investments
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Formula
Sharpe Ratio = (Rp - Rf) / sigma_p
Frequently Asked Questions
What is the Sharpe ratio?
The Sharpe ratio measures the excess return per unit of risk (standard deviation). A higher Sharpe ratio indicates better risk-adjusted performance. It was developed by Nobel laureate William Sharpe.
What is a good Sharpe ratio?
Generally, a Sharpe ratio above 1.0 is good, above 2.0 is very good, and above 3.0 is excellent. A negative Sharpe ratio means the investment returned less than the risk-free rate.
What are the limitations of the Sharpe ratio?
The Sharpe ratio assumes returns are normally distributed and uses standard deviation as the only risk measure. It does not distinguish between upside and downside volatility and may be misleading for investments with non-normal return distributions.
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