Sharpe Ratio Calculator

WHAT IT DOES This tool calculates risk-adjusted performance metrics for your DeFi positions, with the Sharpe ratio as the primary measure. It reads your wallet balances and positions (optional) and combines them with user-defined parameters—expected annual return, risk-free rate, and time period—to compute the Sharpe ratio, Sortino ratio, volatility, excess return, and performance ratings. The Sharpe ratio measures excess return per unit of total volatility, while the Sortino ratio focuses on downside deviation. The tool also provides a rating (Excellent, Very Good, Good, Moderate, Below Risk-Free, or Poor) and a plain-language interpretation of your investment's risk-adjusted performance. HOW TO USE Connect your EVM wallet using the "Connect" button, or manually enter any wallet address (optional). Select your asset (ETH, WBTC, USDC, DAI, or LINK). Enter your expected annual return (%), risk-free rate (%, default 3%), and time period in years. Select your network and click "Calculate Sharpe ratio" to run the analysis. The tool will display your volatility, excess return, Sharpe ratio, annualized Sharpe, Sortino ratio, and a performance rating. A Sharpe ratio above 1.0 is considered good, above 2.0 is excellent, and below 0 indicates negative risk-adjusted returns. The Sortino ratio provides a downside-focused perspective, which is particularly useful for assets with asymmetric return distributions. TECHNICAL MECHANISM The Sharpe ratio calculation follows the standard formula: S = (R_p - R_f) / σ_p, where R_p is the expected return, R_f is the risk-free rate, and σ_p is the volatility (standard deviation of returns). Volatility is modeled based on asset class: ETH ~55%, WBTC ~45%, LINK ~65%, stablecoins ~8%. The volatility is scaled by the square root of the time period to reflect annualized volatility. Excess return is computed as expectedReturn - riskFreeRate. The Sortino ratio uses downside deviation (estimated as σ × 0.7) instead of total volatility, penalizing only downside risk. Performance ratings are assigned based on Sharpe ratio thresholds: Excellent (>2.0), Very Good (>1.5), Good (>1.0), Moderate (>0.5), Below Risk-Free (>0), and Poor (