Sharpe Ratio Calculator
Free Sharpe ratio calculator: turn average return and volatility into an annualised Sharpe — and learn why a high backtested Sharpe is often overfitting, not skill.
The Sharpe ratio measures return per unit of risk. Enter your average return and volatility for the annualised figure — and why a high one from a backtest deserves suspicion.
QuantDojo · Free tool
Sharpe Ratio Calculator
Return per unit of risk, annualised. Useful — but a high Sharpe from many tested variants is often just luck.
How it works: Sharpe = (return − risk-free) ÷ std dev, annualised by × √(periods per year). It rewards smooth returns — but says nothing about how many strategies you tested to find this one.
Educational tool — not financial advice. Annualising assumes independent, identically distributed returns; fat tails and autocorrelation make the real number worse.
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How to use the Sharpe ratio calculator
Enter your average return and standard deviation per period (daily, weekly or monthly), an optional risk-free rate, and pick the frequency. The calculator returns the annualised Sharpe ratio — return per unit of volatility.
Frequently asked questions
What is a good Sharpe ratio?
As a rough guide: below 1 is weak, 1–2 is decent, 2–3 is strong, and above 3 is exceptional — and exceptional should make you suspicious. A backtested Sharpe above 3 is more often a sign of overfitting than genius.
How do you annualise a Sharpe ratio?
Multiply the per-period Sharpe by the square root of the number of periods per year — √252 for daily, √52 for weekly, √12 for monthly returns.
Why can a high Sharpe ratio be misleading?
The Sharpe ratio has no memory of how many strategies you tested to find this one. Test enough variants and a high Sharpe shows up by chance. The Deflated Sharpe Ratio corrects for exactly that.
A headline Sharpe is easy to inflate. Run yours through quantcheck to see the multiple-testing-corrected, deflated version.