What is a good Sharpe Ratio?

A Sharpe Ratio of 1 is considered good. Above 2 is considered amazing. A negative Sharpe Ratio is not considered good because that means your return is less than the risk-free investment (usually the US Treasury-bill).

However, it is quite dependent on the time frame you are measuring. 

There are two pieces of time that are important. 

  1. How long you’ve been collecting all the data for your portfolio (how long you’ve been managing your portfolio)

  2. What intervals you are using to count as a single data point (1d, 1w,1m,1yr)

Professionals have historical performance over the last 5 - 10 years and are measured annually. It is commonly thought that to have a Sharpe 2.0+ qualifies you to be a professional. 

On EquitySim or learners don’t have more than 3 months of historical performance, and we measure it daily. Here, even achieving a Sharpe greater than 0.5 is challenging (less than 1% of our userbase can do this). Here’s a chart that we use to classify performance.

Check out this article if you want to gain a deeper dive on Sharpe:
How to Improve Sharpe Ratio

How did we do?

What are average excess returns?