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Sharpe Ratio Calculator

Computes the Sharpe ratio of a portfolio from its return, the risk-free rate and the standard deviation of returns, annualizes it for monthly, weekly or daily data and gives a rule-of-thumb interpretation.

When to use

You want to compare investments or strategies on return per unit of total risk, or annualize a Sharpe ratio measured on periodic data.

Do not use when: You only care about downside risk (use a Sortino ratio) or the return per unit of market risk (Treynor ratio). Informational only; not financial advice.

Formula

sharpe_ratio = (portfolio_return_percent − risk_free_rate_percent) / standard_deviation_percent; annualized_sharpe_ratio = sharpe_ratio × √periods_per_year

Ex-post Sharpe ratio (Sharpe 1994) with the risk-free rate as benchmark; √t annualization assumes independent, identically distributed period returns. Informational mathematics only; not financial advice.

Inputs

Parameter	Type	Unit	Required	Description
`portfolio_return_percent`	number	% per period	yes	Average (or total) return of the portfolio per period in percent. Range: ≥ -100, ≤ 1000
`risk_free_rate_percent`	number	% per period	yes	Risk-free return over the same period in percent. Range: ≥ -20, ≤ 100
`standard_deviation_percent`	number	% per period	yes	Standard deviation of the portfolio's returns per period in percent. Range: > 0, ≤ 1000
`periods_per_year`	integer		default 1	1 for annual figures, 12 for monthly, 52 for weekly, 252 for trading-daily; the ratio is annualized by √periods. Range: ≥ 1, ≤ 366

Outputs

Output	Type	Unit	Description
`sharpe_ratio`	number		(portfolio_return − risk_free_rate) / standard_deviation.
`annualized_sharpe_ratio`	number		sharpe_ratio × √periods_per_year (equal to sharpe_ratio for annual data).
`excess_return_percent`	number	%	portfolio_return − risk_free_rate per period.
`interpretation`	string		Rule of thumb applied to the annualized ratio: below 1 sub-optimal, 1–2 acceptable, 2–3 very good, above 3 excellent.

Example

12 % return, 3 % risk-free, 15 % volatility (annual): {"portfolio_return_percent":12,"risk_free_rate_percent":3,"standard_deviation_percent":15} → {"sharpe_ratio":0.6,"annualized_sharpe_ratio":0.6,"excess_return_percent":9,"interpretation":"Sub-optimal (below 1)"}

Monthly data: 1 % return, 0.25 % risk-free, 3 % deviation: {"portfolio_return_percent":1,"risk_free_rate_percent":0.25,"standard_deviation_percent":3,"periods_per_year":12} → {"sharpe_ratio":0.25,"annualized_sharpe_ratio":0.866,"excess_return_percent":0.75}

GET https://tttkmbb.com/api/v1/calculate/sharpe-ratio?portfolio_return_percent=12&risk_free_rate_percent=3&standard_deviation_percent=15

Machine access

API: GET https://tttkmbb.com/api/v1/calculate/sharpe-ratio (query parameters) or POST with a JSON body {"inputs": {...}}
Schema: https://tttkmbb.com/api/v1/calculators/sharpe-ratio · Markdown: https://tttkmbb.com/investing/sharpe-ratio.md · JSON definition: https://tttkmbb.com/investing/sharpe-ratio.json
MCP: server https://tttkmbb.com/mcp, tool run_calculator with calculator_id="sharpe-ratio"
OpenAPI operationId: calculate_sharpe_ratio
Freshness: static. Authentication: none. Rate limit: fair use (see rate limits).

Sources

Sharpe W. F. (1994) The Sharpe Ratio, Journal of Portfolio Management 21(1):49-58 (peer_reviewed)
Wikipedia – Sharpe ratio (reference)

FAQ

Which risk-free rate should I use?

A government bill yield over the same period as the returns: an annual yield for annual data, or the yield divided by 12 for monthly data.

Can the Sharpe ratio be negative?

Yes, when the portfolio returned less than the risk-free rate. Negative ratios are not comparable with each other because a higher deviation then makes the ratio look better.

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