Sharpe ratio is a widely used method for calculating the risk-adjusted return and a measurement of the portfolio’s performance per unit of portfolio’s volatility.
How to calculate Portfolio Sharpe ratio
The formula for Sharpe ratio is:
Sharpe = (Ep – Rf) / Rp
where Ep = expected return of the portfolio, Rf = risk-free rate of return for the market, and Rp = risk (volatility) of portfolio returns
For the purpose of Sharpe ratio calculations, Diversiview uses the risk-free rate of return of the market in your profile settings. To learn how to select your preferred market, click here.
A portfolio that is well diversified will have a Sharpe ratio higher than a non-diversified portfolio, and investors generally look for a Sharpe ratio around or above 1.
Where to find Portfolio Sharpe Ratio in Diversiview
You can find the Sharpe Ratio for your portfolio on your dashboard or the Diversiview analysis page, under the ‘Performance & Benchmark’ section. The table shows the Sharpe ratio in its current allocation, and it may also show the potential Sharpe value in the Optimal Portfolio Allocation.
Calculate Your Portfolio Sharpe Ratio
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