Sortino Ratio Calculator

How to Use This Calculator

1. Enter your Portfolio Annual Return.
2. Enter the MAR — your minimum acceptable return. Use the risk-free rate (4.5%) or a custom target like 7%.
3. Enter the Downside Deviation — only the standard deviation of returns below MAR.
4. Compare the Sortino vs Sharpe in the Compare to Sharpe tab.
5. Switch to Professional for Calmar ratio, Omega ratio, and skewness analysis.

Formula

Example

Frequently Asked Questions

• What is the Sortino ratio? ▼
  The Sortino ratio is a modification of the Sharpe ratio that only penalizes downside volatility (returns below the minimum acceptable return), not upside volatility. Sortino = (Portfolio Return − MAR) / Downside Deviation. A higher Sortino is better.
• Why use Sortino instead of Sharpe? ▼
  Investors generally welcome upside volatility (unexpectedly high returns). Sharpe penalizes both up and down volatility equally. Sortino only penalizes returns below the target, making it more appropriate for portfolios with positive skew or asymmetric return profiles.
• What is downside deviation? ▼
  Downside deviation is the standard deviation calculated using only periods where returns fell below the MAR (minimum acceptable return). If your MAR is 4.5%, only months with returns below 4.5% contribute to downside deviation.
• What is the Calmar ratio? ▼
  Calmar Ratio = Annualized Return / Maximum Drawdown. It measures reward relative to the worst historical decline. A Calmar above 0.5 is generally acceptable; above 1.0 is good. It is commonly used to evaluate hedge funds and managed futures strategies.
• When does Sortino > Sharpe? ▼
  Sortino > Sharpe when the portfolio has positive skew — meaning it has more frequent small losses but fewer large ones, or the upside volatility is greater than downside. This indicates a favorable return distribution where Sharpe unfairly penalizes positive performance.

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