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Sharpe Ratio Calculator

Compute Risk Premium and Sharpe Ratio from asset return, risk-free return, and standard deviation.

Sharpe Ratio Calculator

In the world of investing, it’s not enough to look at how much money an asset or portfolio makes — you also need to consider how much risk was taken to achieve those returns. This is where the Sharpe Ratio becomes one of the most trusted and widely used financial metrics.

Our Sharpe Ratio Calculator makes it quick and easy to compute the risk premium and Sharpe ratio for any investment. By simply entering the return on investment, risk-free rate, and standard deviation, you can instantly evaluate whether your portfolio is generating sufficient returns for the level of risk you’re taking.

What is the Sharpe Ratio?

The Sharpe Ratio, developed by Nobel laureate William F. Sharpe, measures the excess return per unit of risk. It compares your portfolio’s return above the risk-free rate against its volatility.

Sharpe Ratio = (Rp − Rf) ÷ σ

(Rp): Return on Asset or Portfolio (%)
(Rf): Risk-Free Return (%)
(σ): Standard Deviation (a measure of volatility)
👉 The higher the Sharpe Ratio, the better the risk-adjusted performance.
👉 A Sharpe Ratio below 1 suggests the returns may not justify the risk.
👉 A Sharpe Ratio above 2 is generally considered very good.

Why Use the Sharpe Ratio Calculator?

Fast & Accurate – No need for manual math or spreadsheets.
Instant Risk Premium – Shows excess returns over risk-free rates.
User-Friendly Design – Clean and intuitive interface.
Accessible Anywhere – Works seamlessly on desktop and mobile.
Completely Free – No registration or subscription required.

Example Calculations

Example 1

Return on Investment (Rp) = 12%

Risk-Free Rate (Rf) = 7%

Standard Deviation (σ) = 10%

Step 1: Risk Premium = 12 − 7 = 5%

Step 2: Sharpe Ratio = 5 ÷ 10 = 0.5

✅ Risk Premium = 5%, Sharpe Ratio = 0.5

Example 2 – High Performing Fund

Return on Investment (Rp) = 18%

Risk-Free Rate (Rf) = 5%

Standard Deviation (σ) = 6%

Step 1: Risk Premium = 18 − 5 = 13%

Step 2: Sharpe Ratio = 13 ÷ 6 = 2.1667

✅ Risk Premium = 13%, Sharpe Ratio ≈ 2.17

Example 3 – Risky Investment

Return on Investment (Rp) = 15%

Risk-Free Rate (Rf) = 4%

Standard Deviation (σ) = 20%

Step 1: Risk Premium = 15 − 4 = 11%

Step 2: Sharpe Ratio = 11 ÷ 20 = 0.55

✅ Risk Premium = 11%, Sharpe Ratio = 0.55

Who Should Use This Calculator?

Investors & Traders – Evaluate whether portfolios are worth the risk.
Portfolio Managers – Compare different investment strategies.
Financial Advisors – Showcase diversification benefits.
Students & Researchers – Study risk-adjusted returns in finance.
Everyday Investors – Check if stocks, ETFs, or mutual funds are efficient.

Real-World Applications

Mutual Funds & ETFs – Compare fund managers’ performance.
Stocks & Bonds – Assess whether returns justify the risk.
Hedge Funds – Evaluate aggressive investment strategies.
Retirement Portfolios – Balance risk and return for long-term goals.

✅ The Sharpe Ratio Calculator is an essential tool for anyone serious about investing. It goes beyond raw returns and provides a clear picture of how efficiently your portfolio is working. Whether you are a professional investor, student, or casual learner, this calculator makes it easy to measure risk-adjusted returns accurately and instantly.

👉 Try the Sharpe Ratio Calculator now on Hive Calculator and gain a deeper understanding of whether your investments are truly worth the risk.