The Sharpe Ratio (developed by Nobel laureate William F. Sharpe) measures how much excess return an ETF portfolio generates for each unit of total volatility (risk) assumed above the risk-free rate.
Sharpe Ratio Formula
Sharpe Ratio = (R_p − R_f) / σ_p
- R_p (Portfolio Return): Annualized return of the ETF or multi-ETF portfolio.
- R_f (Risk-Free Rate): Yield on Vietnam Government Bonds or 12-month commercial bank deposit rate (typically 4.0%–5.0%/year in Vietnam).
- σ_p (Annualized Volatility): Standard deviation of daily returns multiplied by √252.
How to Interpret Sharpe Ratio for Vietnam ETFs
- Sharpe > 1.0: Strong risk-adjusted outperformance.
- Sharpe 0.5 – 1.0: Solid institutional benchmark performance over a full market cycle.
- Sharpe < 0.5: Excess return is modest relative to price swings.
Compute the live Sharpe Ratio of any custom Vietnam ETF combination in our Quantitative Portfolio Risk & Correlation Analyzer.