Sharpe and Sortino Ratio Calculator
Calculate Sharpe and Sortino ratios from annualized inputs or periodic returns, with stated frequency and risk free rate conventions.
Earlier editorial review
- Reviewed
- 2026-09-21
- Methodology
- 1.1
Sources
How it works
Choose simple mode for annualized inputs or advanced mode for a series of periodic returns. In simple mode, enter annualized return, annual risk free rate, total volatility, and, if available, a separate annualized downside deviation. Example: 12%, 4%, 15%, and 10% give Sharpe about 0.5333 and Sortino 0.8.
In advanced mode, enter at least two percentage point returns and choose daily, monthly, or annual frequency. The annual risk free rate is converted to its geometrically equivalent periodic rate. The calculator derives the arithmetic mean, sample volatility, downside deviation, and ratios from the series.
Advanced mode annualizes the arithmetic excess return by multiplying by the periods per year. It annualizes sample volatility and downside deviation by the square root of that number. Downside deviation counts zero for observations above the risk free target and includes every observation in its denominator.
The ratios do not depend on observation order. They do not infer calendar dates or verify that separate series share comparable definitions or measurement windows. Check those details before comparing results.
Step by step
- Choose simple or advanced mode and enter the matching inputs.
- Use percentage points and select the return frequency for a series.
- Review each ratio, the descriptive Sharpe range, and its assumptions.
Worked example
In simple mode, enter annualized return of 12%, annual risk free rate of 4%, annualized total volatility of 15%, and annualized downside deviation of 10%. All four values use percentage points.
The excess return is 8 percentage points. Sharpe is 8 ÷ 15, or about 0.5333. Sortino is 8 ÷ 10, or 0.8. In advanced mode, the annual series −1%, 1%, 3% with annual frequency and a 0% risk free rate has mean return 1%, sample volatility 2%, downside deviation about 0.5774%, Sharpe 0.5, and Sortino about 1.7321.
When to use these ratios
Use these ratios to summarize excess return relative to total or downside variation when the return period and risk free rate conventions are aligned.
Pair the ratios with the return series, measurement window, drawdown, and other measures that address risks the ratios do not capture.
Common input mistakes
Entering 0.02 for a return of 2% changes the scale by a factor of 100. Enter 2 when using percentage points. Check that the selected frequency matches the observations.
Comparing different measurement windows, return definitions, or risk free rates can make ratios incomparable. Align those choices before interpreting differences.
Formulas and conventions
Periodic excess returnᵢ = periodic returnᵢ − periodic risk free rate
Sharpe = annualized arithmetic mean excess return ÷ annualized sample standard deviation
Annualized sample standard deviation = sample standard deviation of periodic excess returns × √periods per year
Downside deviation = √(Σ min(0, excess returnᵢ)² ÷ n) × √periods per year
Sortino = annualized arithmetic mean excess return ÷ downside deviation
Simple mode uses annualized percentage inputs. Advanced mode converts the annual risk free rate to an equivalent periodic rate using compounding. It annualizes the arithmetic mean, not a geometric growth rate. Total volatility uses sample standard deviation with n minus 1; downside deviation uses all n observations and the risk free rate as its target. A ratio is undefined when its denominator is zero.
Limitations and assumptions
The ratios summarize the supplied observations and assumptions. They do not capture liquidity, concentration, leverage, taxes, serial correlation, changing volatility, or the full severity of tail losses. Advanced mode annualizes an arithmetic mean and uses a selected frequency; it does not infer dates or verify that observations are comparable. Short or unusual samples can produce unstable ratios. A zero denominator makes the corresponding ratio undefined.
Key terms
- Sharpe ratio
- Annualized excess return divided by annualized total volatility. It uses standard deviation to describe variation in all directions.
- Sortino ratio
- Annualized excess return divided by downside deviation below the risk free target. In advanced mode, every observation contributes to the denominator count.
- Frequency and annualization
- The selected daily, monthly, or annual frequency sets the annualization factor and the conversion of the annual risk free rate.
Compare related measures
Maximum drawdown measures loss from a peak, while portfolio beta describes sensitivity to market movements. These measures answer different questions from a return divided by volatility ratio.
Review the return series and assumptions alongside each ratio. A single value cannot show the timing or full shape of gains and losses.
FAQ
How is the Sharpe ratio calculated?
Sharpe divides excess return by total volatility. In simple mode, excess return is annualized portfolio return minus annual risk free rate. In advanced mode, the arithmetic mean periodic excess return is annualized, then divided by the annualized sample standard deviation. A positive or negative ratio is a description of these inputs, not a forecast or a measure of suitability.
How does the Sortino ratio differ?
Sortino divides the same annualized excess return by downside deviation. In simple mode, enter a separate annualized downside deviation. In advanced mode, the calculator squares negative excess returns, uses zero for observations above the risk free target, averages across all observations, and takes the square root. It cannot calculate Sortino when downside deviation is zero.
What do the Sharpe ratio ranges mean?
The fixed ranges are at least 3, at least 2 and under 3, at least 1 and under 2, and below 1. They classify the Sharpe value numerically. They are not universal standards, performance grades, or evidence that a strategy is suitable.
How should I enter an advanced return series?
Advanced mode expects each return as a percentage point, so 1 means 1%, not 0.01%. Separate observations with commas, spaces, or line breaks. The frequency selects 252 periods per year for daily data, 12 for monthly data, or 1 for annual data.
How does advanced mode annualize returns and volatility?
Advanced mode converts the annual risk free rate into a geometrically equivalent rate for the selected period. It computes the arithmetic average return, sample volatility using n minus 1, and downside deviation using all n observations. It annualizes the arithmetic excess return by the period count and both deviations by the square root of that count.
Related tools
Maximum drawdown measures a peak to trough loss, and portfolio beta describes sensitivity to market returns. Those measures add different information to Sharpe and Sortino ratios.