Sortino Ratio Calculator


Why use the Sortino Ratio calculator?


The Sortino Ratio is a modified version of the Sharpe Ratio, which measures the risk-adjusted returns of an investment. The Sortino Ratio is a measure of investor risk-reward that considers an investment's risk by comparing the return on the asset to the downside deviation or volatility of the return. The Sortino Ratio Calculator is a helpful tool that can help investors understand the risk-adjusted returns of their investments.


How to Determine the Sortino Ratio?

The Sortino ratio is a risk-adjusted performance measure that compares the returns of an investment to its downside deviation. The formula for calculating the Sortino ratio is as follows:

Sortino Ratio = (Average Return - Target Return) / Margin of Safety

Where:

Average Return: The average return of the investment

Target Return: The desired minimum return

Downside Deviation: The standard deviation of returns below the target return

Here is an example of how to use the Sortino ratio calculator:

Input the following information:

Average return: 8%

Target return: 3%

Downside deviation: 2%

Plug the numbers into the formula:

Sortino Ratio = (8-3)/2 = 2.5

The Sortino ratio is 2.5, meaning the investment has a return 2.5 times higher than its downside deviation.

Please note that this is just an example, and the performance of the investment can change over time, and the ratio is dependent on the data provided.

You can also find online calculators for this ratio, which will simplify the process.