Historical Sharpe Ratio

The Sharpe Ratio measures the risk-adjusted return of a security. This is a useful metric for analyzing the return you are receiving on a security in comparison to the amount of volatility expected. The historical sharpe ratio uses historical returns to calculate the return and standard deviation.

Formula

Historical Sharpe Ratio = (Annualized Return on Lookback Period - Risk-Free Rate) / Historical Annualized Standard Deviation of Monthly Price Returns