What is Sharpe Ratio Calculator?
Calculate Sharpe Ratio to measure risk-adjusted returns of your investment portfolio or mutual fund Simply enter your values, and the calculator instantly computes accurate results using standard financial formulas. All calculations are performed entirely in your browser — nothing is stored or transmitted.
Formula Used
Portfolio Return = annualized return % | Risk-Free Rate = current RBI repo rate or 10-yr G-Sec yield (~6.5-7%) | Standard Deviation = volatility of returns. Higher Sharpe = better risk-adjusted return.
How to Use This Calculator
- Enter your portfolio or fund annualized return percentage
- Enter the risk-free rate (current 10-year G-Sec yield, ~7%)
- Enter the standard deviation (volatility) of your portfolio returns
- Click Calculate to see Sharpe Ratio
- Compare Sharpe Ratio across different funds or portfolios
Worked Example
Portfolio Return: 18% | Risk-Free Rate: 7% | Std Deviation: 15% → Sharpe Ratio = (18-7)/15 = 0.73 | A Sharpe above 1 is excellent
Why Use This Tool?
- Compare portfolios with different risk levels on equal footing
- Identify funds that deliver better return per unit of risk
- Evaluate if additional risk in equity is adequately compensated
- Standard metric used in fund manager performance evaluation
Frequently Asked Questions
What is the Sharpe Ratio?
The Sharpe Ratio measures risk-adjusted return — how much excess return you receive for each unit of risk taken. Formula: (Return − Risk-Free Rate) / Standard Deviation. A ratio of 1 means you earn 1% extra return for each 1% of volatility.
What is a good Sharpe Ratio?
Sharpe Ratio > 1 is good. > 2 is very good. > 3 is excellent. Most top-performing mutual funds in India achieve Sharpe Ratios of 0.7-1.5 over long periods. A Sharpe below 0.5 suggests the returns do not adequately compensate for the risk taken.
How is Sharpe Ratio used to compare mutual funds?
Two funds may have similar returns but different Sharpe Ratios. Fund A at 15% return with Sharpe 1.2 is better than Fund B at 16% return with Sharpe 0.8 — Fund A delivers more return per unit of risk. Always check Sharpe along with absolute returns when selecting funds.
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