Reference Materials
Pain Ratio
The pain ratio is the analogue to the Sharpe Ratio, with the pain index used instead of the standard deviation:
Pain Ratio = (AnnRtn(r1,...,rn) - AnnRtn(c1,...,cn)) / PainIndex(r1,...,rn)
where:
r1,...,rn = manager return series
c1,...,cn = cash equivalent return series
To view our quick tip video on Pain Ratio, click the following link: http://www.styleadvisor.com/sites/default/files/quick_tip_video/pain_rat....
For additional detail, please see our white paper regarding Pain Index and Pain Ratio.