Sharpe Ratio Calculator

The Sharpe ratio measures return earned per unit of risk taken. It is the average return above the risk-free rate, divided by the standard deviation of returns:

Sharpe = (mean return − risk-free) / std dev

Computed on per-period returns it gives a per-period Sharpe; multiply by the square root of the number of periods per year to annualize it (Sharpe_annual = Sharpe_period × √periods). That is why a daily Sharpe scales by √252 and a monthly one by √12. Two rules make Sharpes comparable: express the risk-free rate in the same period as your returns, and only compare figures annualized from the same frequency — a daily-derived Sharpe and a monthly-derived one are not the same measurement. This calculator uses the sample standard deviation (n − 1) in series mode, the standard choice for a return sample.

As a rough field guide, an annualized Sharpe below 1 is weak, 1–2 is solid, 2–3 is strong, and above 3 is exceptional — and exceptional is exactly where you should get suspicious, because an implausibly high backtested Sharpe usually signals overfitting or an unrealistic fill model rather than a genuine edge. Sharpe also has a known blind spot: it penalizes upside and downside volatility equally, so a strategy with occasional large gains can look "riskier" than it is. The Sortino ratio addresses that by using only downside deviation — outside this tool's scope, but reported alongside Sharpe in the strategy metrics tool.

Read Sharpe next to the other edges rather than alone: the profit factor calculator measures how efficiently a strategy converts losses into profits, and the equity curve simulator shows the drawdown path that a single Sharpe number hides. A high Sharpe with a brutal worst-case drawdown is still a strategy few traders can actually hold.