The Sharpe Ratio measures the quality of an equity or hedge fund by showing the return per unit of risk, calculated as $\frac{\mu -r}{\sigma }$, where $\mu$ is the expected return, $r$ is the risk-free rate, and $\sigma$ is the standard deviation (volatility). A higher ratio indicates better performance for the risk taken—more return without excessive variability. In the simulator, the standard deviation slider ( $\sigma$) controls the level of risk you accept: increasing it means you’re comfortable with greater fluctuations in value, while decreasing it reduces exposure to variability, reflecting how much uncertainty you’re willing to tolerate.

The tool shows how $1000 grows over 10 years given the parameters you choose, according to a random price simulation generated through Brownian motion.

You can also click on one of the presets, which plugs in that ETF’s 10-year Sharpe and Std Dev.