Sharpe and Sortino Calculator

The Sharpe and Sortino ratios measure how much return a strategy earns for the risk it takes. The Sharpe ratio uses total volatility; the Sortino ratio uses only downside volatility, so it does not penalise big gains. Paste a list of periodic returns, choose how many periods make a year and enter the risk free rate, and this calculator annualises everything for you. It is a quick way to check a backtest, a fund's monthly figures or your own trading results.

Calculator#

How it works#

Excess return per period = Return - (Risk free rate / Periods per year)
Sharpe ratio = Mean excess return / Standard deviation of excess returns × √(Periods per year)
Downside deviation = √(Average of min(Excess return, 0)²)
Sortino ratio = Mean excess return / Downside deviation × √(Periods per year)

The target for the Sortino ratio here is the risk free rate. The annualised return shown is the simple mean times periods per year, not a compounded figure. See Sharpe Ratio and Sortino Ratio.

Interpreting the results#

A large gap between Sortino and Sharpe suggests positively skewed returns, with bigger gains than losses. A Sortino close to Sharpe suggests symmetric returns. See Skewness and Kurtosis.

Tips for accurate results#

1. Use returns, not prices, and include all costs.
2. Choose the right periods per year: 252 for daily stock returns, 365 for crypto, 12 for monthly.
3. Use enough data: at least several years of monthly returns, or a year or more of daily returns.
4. Do not mix frequencies in one list.
5. Watch for smoothing: illiquid or self reported prices understate volatility and inflate both ratios.

Limitations#

• Both ratios assume past volatility describes future risk.
• Rare crashes may not appear in the sample, flattering strategies like option selling. See Fat Tails.
• Short records make both ratios very noisy.
• Neither shows drawdown depth or duration. See Drawdown Recovery Calculator and Calmar and MAR Ratio.

Where to get your returns#

For your own trading, export monthly account values from your broker, remove deposits and withdrawals, and compute each month's percentage change. For a backtest, use the strategy's daily or monthly returns after costs. For a fund, use the net of fee monthly returns from its factsheet. Paste the list into the box above. If you only have prices, convert them to percentage changes first; the NumPy and Pandas for Traders lesson shows how to do this in a few lines of Python.

Frequently asked questions#

How do I calculate the Sharpe ratio from monthly returns?#

Subtract the monthly risk free rate from each return, divide the average by the standard deviation, and multiply by the square root of 12.

What is the difference between Sharpe and Sortino?#

Sharpe divides excess return by total volatility; Sortino divides it by downside deviation, penalising only returns below the target.

Which periods per year should I use for crypto?#

Usually 365 for daily crypto returns, because crypto markets trade every day.

Next, find the growth optimal bet size with the Kelly Criterion Calculator.