Reference Materials
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
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