Sortino Ratio Calculator

Calculate the Sortino Ratio to measure risk-adjusted returns focusing on downside volatility and negative performance.

✓ Downside Risk Focus ✓ Better Than Sharpe ✓ Asymmetric Analysis

Sortino Ratio Calculator

Input Method

Return Data

Expected or historical average return

Standard deviation of negative returns

Minimum acceptable return (MAR)

Analysis Options

Total volatility for comparison

Sortino Ratio Formula

Downside risk-adjusted return calculation

Formula:

Sortino Ratio = (Return - Target) / Downside Deviation
Focuses only on negative volatility below target return

Quick Examples

Conservative Portfolio
8% return, 5% downside deviation
Growth Stock
15% return, 12% downside deviation
Historical Data
Use sample return series

Sortino vs Sharpe

Sortino: Only downside volatility
Sharpe: Total volatility (up & down)
Better for: Asymmetric returns
Focus: Actual risk that matters

Interpretation Guide

📈 > 2.0: Excellent risk-adjusted returns
📊 1.0-2.0: Good performance
⚖️ 0.5-1.0: Acceptable performance
📉 < 0.5: Poor risk-return trade-off
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Understanding Sortino Ratio

The Sortino Ratio improves upon the Sharpe Ratio by focusing only on downside volatility, providing a more accurate measure of risk-adjusted returns.

  • Downside Focus: Only considers negative volatility
  • Target Return: Uses minimum acceptable return
  • Asymmetric Risk: Better for skewed return distributions
  • Practical Risk: Measures actual downside risk

Applications

Portfolio Analysis

Evaluate portfolio performance focusing on downside risk.

Fund Selection

Choose funds with better downside protection.

Risk Management

Focus on managing actual downside risk.

Performance Evaluation

Better measure for asymmetric return strategies.