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Sortino Ratio Calculator

Calculate the Sortino Ratio for investments or portfolios using expected return, target minimum return (MAR), and downside deviation.

Portfolio inputs

Enter annualized percentages. The Sortino ratio compares excess return to downside risk only.

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Sortino ratio

2.00

Excess return 10.00% over 5.00% downside deviation

Excess return (Rp - MAR)

10.00%

Downside deviation

5.00%

How the Sortino ratio is calculated

From portfolio return, MAR, and downside deviation to risk-adjusted performance.

  1. Calculate excess return above MAR

    Rp−MAR=14.00%−4.00%=10.00%R_p - \text{MAR} = 14.00\% - 4.00\% = 10.00\%

    Subtract the 4.00% minimum acceptable return (MAR) from the 14.00% portfolio return to get 10.00% excess return.

  2. Divide excess return by downside deviation

    Sortino Ratio=Rp−MARσd=10.00%5.00%=2.00\text{Sortino Ratio} = \frac{R_p - \text{MAR}}{\sigma_d} = \frac{10.00\%}{5.00\%} = 2.00

    Sortino ratio equals excess return divided by downside deviation (5.00%).

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What is the Sortino ratio?

The Sortino ratio measures risk-adjusted return using downside deviation instead of total volatility. It answers a practical question: how much return does a portfolio earn per unit of harmful risk? Frank A. Sortino developed the ratio to focus on losses below a minimum acceptable return (MAR) rather than penalizing upside volatility.

Compare Sortino with the Sharpe ratio calculator, which uses total standard deviation. Review systematic risk with the portfolio beta calculator. To measure worst peak-to-trough loss, use the maximum drawdown calculator. To project long-term growth with recurring contributions, try the investment calculator.

Sortino ratio formula

Sortino Ratio=Rp−MARσd\text{Sortino Ratio} = \frac{R_p - \text{MAR}}{\sigma_d}

Where RpR_p is portfolio return, MAR\text{MAR} is the minimum acceptable return (often the risk-free rate or a target hurdle), and σd\sigma_d is downside deviation, the volatility of returns below MAR. All inputs should be annualized percentages in the same units.

Worked example

Suppose a portfolio earns 14%, your MAR is 4%, and downside deviation is 5%. Excess return equals 14% minus 4%, or 10%. Sortino ratio equals 10% divided by 5%, which is 2.0. A higher Sortino ratio generally indicates better return per unit of downside risk.

Sortino vs Sharpe ratio

  • Sharpe penalizes all volatility, including upside swings that investors welcome.
  • Sortino isolates downside deviation, making it useful for asymmetric return profiles.
  • MAR choice matters. Using the risk-free rate vs a custom hurdle changes the ratio.

Frequently asked questions

What should I use as the minimum acceptable return (MAR)?
Common choices include the risk-free rate (such as Treasury yields), zero, or a personal return target. Use the same MAR consistently when comparing portfolios.
How is downside deviation different from standard deviation?
Standard deviation measures total return variability. Downside deviation only counts returns below the MAR, so favorable upside moves do not increase the denominator.
Is a Sortino ratio of 2.0 good?
A Sortino above 1.0 is often considered strong, and values above 2.0 are very good on a risk-adjusted basis. Context, asset class, and time period still matter.
Can the Sortino ratio be negative?
Yes. If portfolio return is below the MAR, excess return is negative and the Sortino ratio will be negative, indicating the strategy failed to clear the hurdle.
Are results stored on your servers?
No. All math runs in your browser. Nothing is sent to the server.

Resources and references

The formulas and methods in this calculator were checked against these independent sources.