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Sortino Ratio Calculator

Find a portfolio's excess return per unit of downside risk: Sortino = (Rp − MAR) ÷ downside deviation.

Sortino ratio
1.25
Excess return over the target
10%

Where this falls

1.3 falls in the "Good risk-adjusted return" range.

How it works

The Sortino ratio (Frank Sortino) is built the same way as this site's Sharpe ratio calculator — excess return over a benchmark, divided by a volatility figure — but uses a different denominator: Sortino = (Rp − MAR) ÷ downside deviation, where MAR is the minimum acceptable return (often 0% or the risk-free rate) and downside deviation measures only the volatility of returns that fell short of MAR. Sharpe's standard deviation penalizes any swing away from the average, upward or downward, equally; Sortino only penalizes the downside, so a portfolio with large upward swings but no shortfalls below its target scores the same on Sortino as one with no swings at all.

All three figures — portfolio return, target/MAR, and downside deviation — are entered directly for whatever period you're evaluating; this calculator never estimates or fetches an actual market rate or an actual historical downside deviation. A negative ratio means the portfolio's return didn't even reach the target, so any downside volatility it took on bought no net reward over simply hitting that target exactly.

FAQ

How is this different from the Sharpe ratio?

Both divide excess return by a volatility measure, but Sharpe's denominator (total standard deviation) counts every swing away from the mean, up or down, as "risk" — while Sortino's denominator (downside deviation) counts only the swings that landed below the target return. Most investors don't actually mind upside volatility, which is why Sortino is often preferred for strategies that are expected to have an asymmetric return profile, like one with a long options overlay.

Where does downside deviation come from?

It's the standard deviation computed using only the returns that fell below the minimum acceptable return, with every return at or above it treated as a zero deviation rather than excluded outright. This calculator takes that figure as a direct input — the same way its Sharpe/Treynor ratio siblings take standard deviation or beta directly — rather than deriving it from a list of historical returns.

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