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finance.business-sharpe-enhancement Calculator
Calculates Sharpe ratio improvement from adding an asset or strategy to a business finance portfolio. The Sharpe ratio increase from adding an uncorrelated asset can be substantial — a 0.3-correlation asset with the same Sharpe ratio improves the portfolio Sharpe by approximately 30%.
Inputs
Ret
Reference formula or conversion factor shown for context.
Rf
Return on a theoretically safe investment like a government T-bill. The baseline return everything else is compared against. Enter as a decimal (e.g. 0.05 for 5%).
Vol
Annualised standard deviation of returns, as a decimal (e.g. 0.2 for 20%). Higher volatility increases option value. Implied vol is derived from market prices.
Results
sharpe ratio
Risk-adjusted return: (portfolio return − risk-free rate) / standard deviation. Above 1: good. Above 2: very good. Above 3: excellent. Below 0: worse than the risk-free rate.
excess return
Sample size or count used in the calculation.
volatility
The value at the specified point or condition.
reward/risk
Overall risk level based on the computed score or classification. Higher risk may call for mitigating actions or additional review.
quality
A qualitative assessment of how the result compares to the desired standard or benchmark.