The Sharpe Ratio Calculator allows you to measure an investment's risk-adjusted return. Download CFI's Excel template and Sharpe Ratio calculator. Sharpe Ratio = (Rx - Rf) / StdDev Rx. Where: Rx = Expected portfolio return, Rf = Risk free rate of return, StdDev Rx = Standard deviation of portfolio return / volatility. About standard deviation. Definition: The standard deviation measures how close the set of data is to the mean value of the data set. If data set have high standard deviation than the values are spread out very much. If data set have small standard deviation the data points are very close to the mean. How to use this calculator.
This page explains how to calculate the standard deviation based on the entire population using the STDEV.P function in Excel and how to estimate the standard deviation based on a sample using the STDEV.S function in Excel. What is Standard Deviation?Standard deviation is a number that tells you how far numbers are from their mean.1. For example, the numbers below have a mean (average) of 10.Explanation: the numbers are all the same which means there's no variation. As a result, the numbers have a standard deviation of zero.
The STDEV function is an old function. Microsoft Excel recommends using the new STEDV.S function which produces the exact same result. The numbers below also have a mean (average) of 10.Explanation: the numbers are close to the mean. As a result, the numbers have a low standard deviation.3. The numbers below also have a mean (average) of 10.Explanation: the numbers are spread out. As a result, the numbers have a high standard deviation. STDEV.PThe STDEV.P function (the P stands for Population) in Excel calculates the standard deviation based on the entire population.
For example, you're teaching a group of 5 students. You have the test scores of all students.
The entire population consists of 5 data points. The STDEV.P function uses the following formula:In this example, x 1 = 5, x 2 = 1, x 3 = 4, x 4 = 6, x 5 = 9, μ = 5 (mean), N = 5 (number of data points).1. Calculate the mean (μ).2. For each number, calculate the distance to the mean.3. For each number, square this distance.4.
Sum (∑) these values.5. Divide by the number of data points (N = 5).6. Fortunately, the STDEV.P function in Excel can execute all these steps for you. STDEV.SThe STDEV.S function (the S stands for Sample) in Excel estimates the standard deviation based on a sample. For example, you're teaching a large group of students. You only have the test scores of 5 students.
The sample size equals 5. The STDEV.S function uses the following formula:In this example, x 1=5, x 2=1, x 3=4, x 4=6, x 5=9 (same numbers as above), x̄=5 (sample mean), n=5 (sample size).1. Repeat steps 1-5 above but at step 5 divide by n-1 instead of N.2. Fortunately, the STDEV.S function in Excel can execute all these steps for you.Note: why do we divide by n - 1 instead of by n when we estimate the standard deviation based on a sample?
![Template For Standard Deviation Calculator Template For Standard Deviation Calculator](http://ncalculators.com/images/formulas/population-standard-deviation.png)
Bessel's correction states that dividing by n-1 instead of by n gives a better estimation of the standard deviation.