Sharpe Ratio Calculator is used to calculate the average return earned in excess of the risk-free rate per unit of total risk or volatility
- Sharpe Ratio:
- What does Sharpe Ratio mean?
- The Sharpe ratio is used to compare the change in a portfolio's overall risk-return and was developed by Nobel laureate William F. Sharpe. It has become the most widely used method for calculating the risk-adjusted return.
- Sharpe Ratio = (Expected portfolio return - Risk free rate) / Portfolio standard deviation
A financial asset has an expected return of 8%, the risk-free rate is 2%. Also, the standard deviation of the asset's excess return is 10%, as per the formula the Sharpe Ratio will be:-
- = (0.08 - 0.02) / 1
- = 0.6
- Jun 4, 2018
- Tool Launched