Enter your investment return, risk-free rate, and the standard deviation of the portfolio to calculate the Sharpe ratio of the portfolio.
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Sharpe Ratio Formula
The following formula can be used to calculate the Sharpe ratio of an investment.
SR = (IR – RFR) / SD
- Where SR is the Sharpe ratio
- IR is the investment return
- RFR is the risk-free return
- SD is the standard deviation
Sharpe Ratio Definition
A Sharpe ratio is defined as the ratio of the difference between an investment and a risk-free asset with respect to the standard deviation of those investments.