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, …, rn) – c)/DownsideDeviationConstantMAR(r1, …, rn)

    where:

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


SortinoRatioCashMAR = (AnnRtn(r1, …, rn) – AnnRtn(c1, …, cn))/DownsideDeviationCashMAR(r1, …, rn)

    where:

        r1, …, rn = manager return series
        c1, …, cn = cash equivalent return series

To view our quick tip video on the Sortino Ratio, click the following link: http://www.styleadvisor.com/sites/default/files/quick_tip_video/sortino_....

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