Sharpe Ratio Calculator
Calculate the Sharpe ratio — risk-adjusted return per unit of volatility — either from summary statistics (return, risk-free rate, standard deviation) or from a series of periodic returns, annualized. Get a performance rating alongside the ratio.
Input
A short-term government bond yield (e.g. a 3-month T-bill rate) is the usual choice.
Output
| Metric | Value |
|---|---|
| No data yet | |
More ways to use this tool
REST API
curl -X POST https://api.iotools.cloud/v1/tool/sharpe-ratio-calculator \
-H "Authorization: Bearer YOUR_API_KEY" \
-H "Content-Type: application/json" \
-d '{
"mode": "summary",
"portfolioReturn": "12",
"riskFreeRate": "3",
"stdDev": "15"
}'Swap in your own key from your account. The tool's fields are the body — no wrapper.
Ask an AI agent
Use the IOTools `sharpe-ratio-calculator` tool (Sharpe Ratio Calculator) on this input:
YOUR_INPUT_HEREPaste this at any agent connected to the IOTools MCP server, then add your input.
Embed widget
<iframe
src="https://iotools.cloud/embed/sharpe-ratio-calculator/"
width="100%" height="520" frameborder="0" scrolling="no" loading="lazy"
title="Sharpe Ratio Calculator — iotools.cloud"
sandbox="allow-scripts allow-forms allow-same-origin allow-downloads allow-popups allow-popups-to-escape-sandbox"
allow="clipboard-write"
style="width:100%;border:1px solid #e5e7eb;border-radius:12px;overflow:hidden"></iframe>
<script src="https://iotools.cloud/embed.js" async></script>Drop this into your own page — free, no key required, just a link back.
| Cost per API/MCP call | From 5 credits |
|---|---|
| Need more credits? | View pricing |
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Guides
What this calculates
Raw return doesn't tell you how much risk was taken to get it — a 12% return with wild swings isn't obviously better than an 8% return that barely moves. The Sharpe ratio answers that: it's the excess return over a risk-free rate, divided by the volatility (standard deviation) it took to earn it. Higher is better, since it means more return per unit of risk.
How this tool works
Pick an Input Mode:
- Summary Statistics — enter a portfolio's annual return, a risk-free rate, and the standard deviation of returns directly, if you already have them (from a broker statement, a backtest report, etc.).
- Return Series — paste a list of periodic returns (comma or newline separated, in percent), choose how often they occur (annually, quarterly, monthly, weekly, or daily), and enter the annual risk-free rate. The tool computes the mean and standard deviation from the series itself, then annualizes the result.
The output table always shows the Sharpe Ratio and a Performance Rating; series mode additionally shows the per-period and annualized mean return and standard deviation, so you can check the intermediate numbers rather than trust a single output.
The math
Sharpe ratio = (mean return − risk-free rate) ÷ standard deviation of returns.
In series mode, the per-period risk-free rate is the annual rate divided evenly across the period count (a simple approximation, not a compounding de-annualization), and the standard deviation can be sample (÷ n−1, the default — the right choice for a return series that's a sample of a longer history) or population (÷ n). The resulting per-period Sharpe ratio is annualized by scaling it by the square root of the period count — the standard convention (√12 for monthly data, √252 for daily trading data, and so on).
Reading the rating
| Sharpe Ratio | Rating |
|---|---|
| < 0 | Negative (Poor) |
| 0 – 1 | Sub-optimal |
| 1 – 2 | Good |
| 2 – 3 | Very Good |
| ≥ 3 | Excellent |
These are common rule-of-thumb bands, not a universal standard — what counts as "good" varies by asset class and time period.
Common uses
- Comparing two portfolios or funds on a risk-adjusted basis, not just raw return
- Checking whether a backtested strategy's return justifies its volatility
- Deciding between a smoother, lower-return option and a higher-return, choppier one
Privacy
This tool runs entirely in your browser. Your numbers are never uploaded to a server.