Sortino Ratio Calculator
Measure your strategy's risk-adjusted performance using the Sortino Ratio. Enter your returns, risk-free rate, and frequency to see your annualized downside-risk-adjusted return.
Enter periodic returns as percentages (e.g. 1.2 = 1.2%), separated by commas or new lines
Use your benchmark risk-free rate (e.g. T-bills)
Select the frequency of your return data
Enter your return series, risk-free rate, and frequency, then click Calculate Sortino Ratio to see your downside-risk-adjusted performance metrics.
For educational purposes only. Not financial advice. Read full disclaimer
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Sortino Ratio Formula
Excess Return = Return - Risk-free Rate
Downside Deviation = sqrt( sum( min(0, r - Rf)² ) / N )
Sortino (periodic) = Mean Excess Return / Downside Deviation
Sortino (annual) = Sortino (periodic) × √(periods per year)
Worked Examples
Example 1: High-Return Strategy with Occasional Large Losses
A momentum strategy returns 18% annually but has some big drawdown months, producing a downside deviation of 12%. The risk-free rate is 2%.
- Excess return = 18% − 2% = 16%
- Sortino ratio = 16% / 12% = 1.33
- Total standard deviation = 18% (Sharpe = 16% / 18% = 0.89)
- Interpretation: The Sortino of 1.33 is higher than the Sharpe of 0.89, reflecting that much of the volatility is to the upside and the downside risk is less severe than total volatility implies.
Example 2: Consistent Strategy with Very Few Losses
A mean-reversion strategy returns 10% annually with a low downside deviation of 3% because it rarely posts negative months. The risk-free rate is 2%.
- Excess return = 10% − 2% = 8%
- Sortino ratio = 8% / 3% = 2.67
- Interpretation: A Sortino of 2.67 is excellent. Despite modest raw returns, the strategy is highly efficient because it almost never experiences significant downside.
How to Use This Calculator
- Enter your periodic returns — paste your returns as comma-separated values (e.g.,
1.8, -0.5, 2.3, -1.1). Each value represents one period. - Set the risk-free rate or target return — enter the annualized benchmark rate. The Sortino uses this as the threshold below which returns count as "downside."
- Choose your frequency — select daily, weekly, monthly, or annual so the calculator can annualize correctly.
- Click Calculate — the tool computes the annualized Sortino Ratio, mean excess return, and downside deviation for your strategy.
Frequently Asked Questions
- What's a good Sortino ratio?
- A Sortino ratio above 1.0 is generally acceptable, above 2.0 is very good, and above 3.0 is excellent. Because the Sortino ignores upside volatility, it tends to produce higher numbers than the Sharpe ratio for the same strategy.
- How does Sortino differ from Sharpe?
- The Sharpe ratio divides excess return by total standard deviation, penalizing both winning and losing periods equally. The Sortino ratio only penalizes returns that fall below the target, making it more appropriate for strategies with asymmetric (skewed) return profiles.
- What is downside deviation?
- Downside deviation is the standard deviation calculated using only returns that fall below a target rate (typically the risk-free rate or zero). Returns above the target are treated as zero deviations and ignored in the calculation.
- When is Sortino better than Sharpe?
- Use Sortino when your strategy has large positive outliers you don't want to penalize — for example, trend-following systems that hold big winners. Sharpe would unfairly punish those gains as "volatility," while Sortino focuses only on the harmful downside risk.
- What target return should I use?
- The most common target is the risk-free rate (e.g., current T-bill yield), which defines "downside" as anything that underperforms cash. Some traders use 0% as the target to flag any losing period as downside, which produces a more conservative Sortino.