Sortino Ratio Calculator
Measure downside risk-adjusted return by penalizing only negative return volatility.
How the Calculation Works
Read parameters and compute total exposure: multiply order quantity by contract unit multiplier.
Evaluate terminal return at the selected target price using strict financial mathematical boundary logic.
Deduct upfront capital commitments, taxes, or net debits to produce final net profit or loss realization.
Calculation Formula
Example Calculation
24% return, 7% target, 8% downside deviation.
High ratio confirms upside volatility without heavy downside drawdowns.
Assumptions & Parameters
- Only negative deviations below the target return threshold are included in downside deviation.
Frequently Asked Questions
What is the Sortino ratio?
A variation of the Sharpe ratio that evaluates return relative only to negative (downside) volatility.
Why is Sortino preferred over Sharpe for active traders?
Traders welcome sudden large gains; Sortino does not penalize positive volatility.
What is a good Sortino ratio?
A Sortino ratio above 2.0 indicates an attractive, controlled-risk trading system.
What is downside deviation?
The standard deviation calculated strictly from returns that fall below your minimum target threshold.
Can Sortino be calculated on monthly returns?
Yes, provided returns and target benchmarks are measured on the same monthly basis.
How can I improve my strategy's Sortino ratio?
By using hard stop-losses to eliminate large left-tail drawdown events.