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Sortino Ratio Calculator

Calculate the Sortino Ratio for investments or portfolios using expected return, target minimum return (MAR), and downside deviation.

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What is the Sortino Ratio Calculator?

The Sortino Ratio Calculator measures the risk-adjusted return of an investment portfolio by evaluating excess return relative strictly to downside volatility (downside risk), ignoring positive upside volatility.

Sortino Ratio Formula

$$\text{Sortino Ratio} = \frac{R_p - R_f}{\sigma_d}$$

Where:

  • \(R_p\): Expected Return of the Portfolio (%)
  • \(R_f\): Risk-Free Rate or Minimum Acceptable Return (MAR) (%)
  • \(\sigma_d\): Downside Deviation / Downside Risk (%)

Sortino vs. Sharpe Ratio

While the Sharpe Ratio penalizes both upward and downward price movements equally, the Sortino Ratio isolates bad risk (losses below the minimum acceptable return). This makes the Sortino Ratio particularly popular for evaluating asymmetric return distributions, hedge funds, and growth portfolios.

Frequently Asked Questions

What is a good Sortino Ratio?

A Sortino Ratio above 2.0 is generally considered good, while ratios above 3.0 indicate exceptional downside-adjusted performance.

What is Minimum Acceptable Return (MAR)?

MAR is the hurdle rate or minimum return an investor demands (e.g. 0%, risk-free rate, or target inflation rate). Returns below MAR contribute to downside deviation.

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