Trends/Statistics and risk

Rolling Sharpe ratio

The average return over a year divided by the volatility of that return, as a rolling line.

Statistics and riskBest on 3Y, 5Y, MAXAlso called return per unit of risk

Illustration of the rolling Sharpe ratio shape. It is a sketch, not real price data.

What it shows

The Sharpe ratio, from William Sharpe, divides the average excess return (over a risk-free rate) by the standard deviation of returns. A higher number means more return per unit of volatility.

We compute it over 252 days of daily returns, with the risk-free rate set to zero for simplicity.

How we find it

The same code that draws it on your chart follows these steps, with the same result every time.

Daily returns for the last 252 days.
Mean daily return ÷ standard deviation.
Multiply by √252 to annualize.
Plot as a rolling line.

Starting values: Window 252 bars; Risk-free 0. These are proposed and will be tuned on real price data before launch.

How to read it

The panel shows the ratio over time.
The dashed line is zero.
Above 1 is often called good.

Status labels you may see

Label	What it means
High	Above 1.
Moderate	0 to 1.
Negative	Below 0.

What cancels it

Nothing cancels it.

What traders check next

Volatility.
Period.
Compare with the index.

Limits

Assumes a bell curve.
Penalizes upside swings too.
Window is a choice.

Try it in forecastviz

Open any ticker and choose Statistics and risk → Rolling Sharpe ratio in the left menu.
Switch between 3Y, 5Y, MAX to see how the picture changes.
Compare with Rolling return and Maximum drawdown on the same chart.

Open on a ticker

Questions

Is a high Sharpe good?

It means high past return for its volatility. No claim about future.

Why zero risk-free?

For simplicity. The actual rate would lower the ratio.