Sortino Ratio

The Sortino Ratio is an analog to the Sharpe Ratio, with the standard deviation replaced by the downside deviation. Accordingly, there are two versions: one uses the downside deviation with constant MAR, the other uses the downside deviation with cash as the MAR.

SortinoRatioConstantMAR = (AnnRtn(r₁, …, r_n) – c) / DownsideDeviationConstantMAR(r₁, …, r_n)

where:

r₁, …, r_n = manager return series
c = annualized constant MAR

SortinoRatioCashMAR = (AnnRtn(r₁, …, r_n) – AnnRtn(c₁, …, c_n)) / DownsideDeviationCashMAR(r₁, …, r_n)

where:

r₁, …, r_n = manager return series
c₁, …, c_n = cash equivalent return series

Related Statistics:
Sharpe Ratio