# Sharpe Ratio Calculator

###### Updated: Jun 4, 2018

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:
..
Background Information

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.
Formula
Sharpe Ratio = (Expected portfolio return - Risk free rate) / Portfolio standard deviation
Example

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

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