Sharpe Ratio & Sortino Ratio Calculator
Calculate risk-adjusted returns for your portfolio. Compare Sharpe and Sortino ratios for better investment analysis.
Portfolio Parameters
Risk-Adjusted Performance
Risk-Adjusted Return Analysis
Excess Return: 9.00%
Std Deviation: 15.00%
Excess Return: 9.00%
Downside Deviation: 10.00%
Ratio Comparison
Sortino ratio is higher, suggesting better downside risk protection.
Sharpe & Sortino Ratio Calculator FAQ
What is the Sharpe Ratio?
The Sharpe ratio measures risk-adjusted returns by dividing excess returns (portfolio return minus risk-free rate) by the portfolio's standard deviation. Higher ratios indicate better risk-adjusted performance.
What is the Sortino Ratio?
The Sortino ratio is similar to Sharpe ratio but uses downside deviation instead of total standard deviation. It focuses only on harmful volatility (returns below a target), providing a better measure of downside risk.
What is a Good Sharpe Ratio?
A Sharpe ratio above 1 is generally considered good, above 2 is very good, and above 3 is excellent. However, this depends on the investment type and market conditions. Negative ratios indicate poor risk-adjusted returns.
What's the Difference Between Sharpe and Sortino Ratios?
Sharpe ratio penalizes all volatility, while Sortino ratio only penalizes downside volatility. Sortino is preferred when investors are more concerned about losses than gains.
How to Interpret Risk-Adjusted Returns?
Higher ratios indicate better compensation for the risk taken. Compare ratios across similar investments or the same portfolio over time. Use them alongside other metrics for comprehensive analysis.
What Risk-Free Rate Should I Use?
Use the current yield on government bonds matching your investment horizon. For long-term analysis, use 10-year Treasury yields. For short-term, use 3-month T-bill rates. Keep it consistent across comparisons.
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