Free · General investment calculators 🤑

Sharpe Ratio & Excess Return Calculator

Relate investment return, a risk-free reference and return volatility.

  • Formula & worked example
  • Private in your browser
  • No signup
Go to tool

Calculator inputs

Loading calculator…

How to use this calculator

  1. Enter the known values in the units shown. Results update as you type.
  2. Edit a calculated value to solve backwards, or lock a value to hold it fixed.
  3. Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

An investment return of 10%, a risk-free return of 2% and a compatible 4% return standard deviation give an 8-percentage-point excess return and a Sharpe ratio of 2.

Excess return = investment return − risk-free return; ratio = excess return ÷ standard deviation

Worked example

Enter these known values and leave the other values blank.

Mean / expected investment return
10 %
Matching risk-free return
2 %
Excess-return standard deviation
4 %
Risk premium
8 %
Sharpe ratio
2

Assumptions and limitations

  • No. Supply a compatible return standard deviation. Use matching time periods; when the risk-free return varies, the standard deviation of differential returns is relevant. A ratio alone does not describe tail losses or guarantee future performance.
  • Use consistent periods, rates and accounting definitions. These calculations describe the entered assumptions.

Common questions

Does this calculate volatility from a return history?

No. Supply a compatible return standard deviation. Use matching time periods; when the risk-free return varies, the standard deviation of differential returns is relevant. A ratio alone does not describe tail losses or guarantee future performance.

References

The calculation equations, inverse formulas, units, and input rules were imported from this source. Bookify provides the interface and equation solver.

Explore general investment calculators 🤑 or browse all finance calculators.