Sortino Ratio Calculator
Calculate the Sortino ratio — a risk-adjusted return metric that only penalizes downside volatility, unlike the Sharpe ratio.
Sortino Ratio
Sortino Ratio improves on the Sharpe Ratio by only considering downside deviation rather than total volatility. This means upside volatility (big wins) does not penalize your score.
Sortino Ratio = (Average Return − Target Return) / Downside Deviation
Where:
- Average Return = mean return over the period
- Target Return = minimum acceptable return (often the risk-free rate or 0%)
- Downside Deviation = standard deviation of returns BELOW the target only
Interpretation:
- < 0 — Failing to meet target return
- 0–1.0 — Below average risk-adjusted performance
- 1.0–2.0 — Good
- 2.0–3.0 — Very good
- 3.0+ — Excellent
Sortino vs. Sharpe:
- Sharpe penalizes ALL volatility equally (up and down)
- Sortino only penalizes DOWNSIDE volatility
- A strategy with large occasional winners will have a better Sortino than Sharpe
- Sortino is generally considered the more appropriate metric for trading strategies
- If Sortino » Sharpe, your strategy has favorable positive skew