Measure

Sharpe ratio

Excess return per unit of total volatility. Formula: S = (R_p − R_f) / σ_p.

Definition

Excess return per unit of total volatility.

Formula

S = (R_p − R_f) / σ_p

How to read it

Higher is better for a given return stream. It is only comparable between series measured at the same frequency over the same window with the same risk-free proxy.

Measured on real funds

Both ratios on the same funds over the same months, so the difference between them is visible rather than asserted. Sharpe divides excess return by all volatility; Sortino divides it by downside volatility only. Risk-free proxy is BIL at 1.38% annualised.

Fund	Sortino	Sharpe
VOO	1.55	0.95
SCHD	1.48	0.89
VGT	1.14	0.70
VUG	1.03	0.66
VIG	1.02	0.68
VTV	0.85	0.58
VTI	0.81	0.55
VT	0.66	0.46
QQQ	0.6	0.40
XLK	0.59	0.39
AGG	0.56	0.37
VXUS	0.53	0.36
BND	0.52	0.35
SMH	0.45	0.30
VWO	0.44	0.30
VEA	0.32	0.23

Computed from Yahoo Finance monthly total return, recomputed with every update of the site. How these figures are produced.

What it does not tell you

It treats upside and downside volatility identically, so a fund punished for rising sharply scores worse. It also assumes roughly symmetric returns; strategies that sell tail risk can post excellent Sharpe ratios right up until the tail arrives.

Applied in 42 articles

Every figure computed with this measure on this site follows the conventions set out in the methodology. All measures →