Sharpe Ratio Calculator
Compute the Sharpe ratio of any return series with a configurable risk-free rate. Includes the 95% confidence interval, which most calculators omit but matters a lot for short samples.
Results
The annualized Sharpe ratio of 3.44 is extremely high — verify the data is clean, but the 95% confidence interval (-2.31 to 9.19) crosses zero — with only 30 observations the result is not statistically significant. The strategy returned an annualized 45.02% at 11.92% volatility.
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Frequently asked questions
Why Sharpe matters
Two strategies that returned 20% in a year are not equivalent if one ran at 10% volatility and the other at 40%. The first is twice as efficient with risk; over many years the lower- vol strategy will compound more reliably and have shallower drawdowns. The Sharpe ratio captures that distinction in one number: excess return per unit of volatility.
The formula
Per-period Sharpe = (mean return − risk-free rate) / std deviation. Annualized Sharpe scales by the square root of the number of periods per year: per-period Sharpe × √(periods per year). For daily data with 252 trading days, that means multiplying by ~15.87.
What the confidence interval tells you
Most online calculators just give you a Sharpe number. That is misleading: with 30 daily returns, a sample Sharpe of 2.0 might really be anywhere from -1 to +5. The 95% CI shown here uses Lo's 2002 standard error formula. A wide CI means "not enough data to say." A narrow CI that excludes zero means "there really is something here."
What Sharpe does NOT capture
- Asymmetry. Sharpe penalizes upside volatility just as much as downside volatility. The Sortino ratio fixes this by using downside deviation only.
- Tail risk. Sharpe assumes returns are roughly normal. Strategies that look great by Sharpe but have fat-tailed losses (e.g. selling out-of-the-money options) can blow up despite a high reported Sharpe.
- Drawdown. The peak-to-trough loss along the way is invisible in Sharpe. Calmar ratio (return divided by max drawdown) addresses this.
- Survivorship and selection bias. A backtest run on the current S&P 500 constituents has a higher Sharpe than the live strategy will, because failed companies were dropped from the index over time.
For more depth
For a fuller risk picture, the QuantOracle composite endpoint /v1/risk/full-analysis returns Sharpe alongside Sortino, Calmar, max drawdown, VaR, CVaR, and Kelly in a single call. For just downside risk, see the Value at Risk calculator.