Risk Adjusted Return Calculator

This calculator helps you evaluate investment performance by adjusting returns for risk. The Sharpe Ratio is commonly used to measure risk-adjusted return.

Input Parameters

Calculation Results

Sharpe Ratio

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Excess Return

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Annualized Return

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Calculation Formula

Sharpe Ratio = (Rp - Rf) / σ

Where:
Rp = Portfolio Return
Rf = Risk-Free Rate
σ = Standard Deviation (Volatility)

Risk Adjusted Return Calculator Usage Guide

Learn how to use the Risk Adjusted Return Calculator and understand the Sharpe Ratio metric

How to Use This Calculator

  1. Enter your portfolio's annual return percentage (e.g., 12.5%)
  2. Enter the risk-free rate (e.g., 2.0%) - typically the return on a government bond
  3. Enter the standard deviation (volatility) of your portfolio returns (e.g., 15.0%)
  4. Click the "Calculate" button to see your Sharpe Ratio and other metrics

About Sharpe Ratio

The Sharpe Ratio is a measure of risk-adjusted return. It tells you how much excess return you're receiving for the extra volatility that your investment has. A higher Sharpe Ratio is generally better, indicating better risk-adjusted performance.

Interpreting Results

  • Sharpe Ratio > 1.0: Good risk-adjusted performance
  • Sharpe Ratio > 2.0: Excellent risk-adjusted performance
  • Sharpe Ratio < 1.0: Poor risk-adjusted performance

This calculator uses the simplified formula for Sharpe Ratio. For more complex investment scenarios, additional factors such as taxes, transaction costs, and correlation between assets should be considered.