Sharpe ratio calculator
Sharpe and Sortino from your monthly returns.
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Probabilistic Sharpe ratio
Is a good Sharpe ratio skill, or a short lucky run? The chance your record beats a bar, and how many months it takes to know.
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The record
Skill or luck
A 80% chance that the true Sharpe ratio is above 0 a year: not yet past the usual 95% line, so luck could explain this record.
- Sharpe ratio
- 0.96 a year on 12 months, before any cash rate.
- Record needed
- About 43 months at this Sharpe ratio and shape to be 95% sure it beats 0; you have 12.
- Tried more than one?
- If this is the best of several strategies or settings, type how many in the form: the best of many looks good by luck, and the page raises the bar to match.
- Shape of the months
- Skew -0.53, negative: losing months have been bigger than winning ones, which lowers the confidence. Kurtosis 2.0, below the 3 of a normal curve: thin tails, few extreme months.
- Read it with care
- The test assumes the months are independent and the strategy did not change. Returns from a backtest that was tuned many times need the number of tries, or the chance is overstated.
The chance that the true Sharpe ratio a year is above each bar, and the months of record needed to be 95% sure.
| Above | Chance | Months needed |
|---|---|---|
| 0 | 80% | 43 |
| 0.5 | 66% | 181 |
| 1 | 49% | Never |
| 1.5 | 32% | Never |
Education only, not investment advice. The answer comes from the numbers you typed in, not from your account or the market. Simulated results are hypothetical and have limits: real trading has slippage, gaps, changing results and emotions. Trading leveraged products can lose money quickly, including all of it. Risk warning
Educational only, not financial advice; trading involves risk.
A Sharpe ratio is an estimate, not a fact
Twelve good months can show a Sharpe ratio of 1 by luck alone. David Bailey and Marcos Lopez de Prado turned that into a number: the probabilistic Sharpe ratio is the chance that the true ratio is above a bar, given how many months there are and how lopsided and fat-tailed they were. Their deflated version also raises the bar when the strategy is the best of many tried, because the best of a hundred random strategies always looks good.
Get the plain ratios from the Sharpe ratio calculator, see how deep the record fell with the maximum drawdown calculator, check the spread of the returns with the return distribution calculator, and size the trade with the position size calculator.
Not advice. A test on the months you type; a record that passed can still fail in the future.
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Pricing
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Baroq never holds your money and never trades for you. Educational only, not financial advice; trading involves risk.