How do I calculate Distance between two sensors?
Finding distances accurate to a few mm is not going to work with LEDs and photodiodes.  Light takes about 1 ns per foot.  To measure distance with time of arrival you would need resolution of just a few ps.  Not only do ordinary LEDs and photodiodes not react that fast, but the circuit to interpret those signals would need to be very very special even if they could.

You may be able to get what you want by using ultrasound instead of light.  At about 3 ms per meter, you have some chance of getting reasonable resolution.  Typical cheap ultrasound transducers are resonant around 40 kHz.  Those will probably not be good enough because the limited bandwidth will get in the way of the time resolution you need.  You should look at higher frequency ultrasound transmitters and receivers that are also more broad spectrum.  You might have a chance with those.

Otherwise, there are other techniques than time of arrival to determine position.  You could still use light if you can determine the direction of the light instead of trying to measure tiny propagation time differences.  Two cameras that look for the location of the beacon in theory would be good enough.