Sortino Ratio Calculator
Measure downside-only risk-adjusted return — calculate the Sortino Ratio from direct inputs or a return series with automatic annualisation.
Input Parameters
All inputs below should be in the same period
The MAR (target return) — often the risk-free rate or 0%
Standard deviation of only the returns that fell below the MAR
Results
Sortino Ratio
1.1000
Interpretation
Good — adequate compensation for downside risk taken
Breakdown
Annualised Sortino Scale
Complete Guide to the Sortino Ratio
What Is the Sortino Ratio?
The Sortino Ratio is a risk-adjusted performance metric that isolates "bad" volatility from "good" volatility. It was developed by Frank Sortino as a refinement of the Sharpe Ratio, built on the observation that most investors don't actually mind upside swings — only downside ones.
Two portfolios can have identical standard deviation but very different risk profiles: one might swing wildly on the upside while rarely dropping, while the other swings symmetrically in both directions. The Sortino Ratio separates them by measuring deviation only below a Minimum Acceptable Return (MAR). Pair it with our Sharpe Ratio Calculator to see the full risk-adjusted picture side by side.
Formula
Sortino Ratio:
Sortino = (Rp − MAR) / σd
Where: Rp = average portfolio return, MAR = minimum acceptable return, σd = downside deviation
Downside Deviation:
σd = √( Σ min(0, Rᵢ − MAR)² / n )
Where: only returns below the MAR contribute to the sum; upside returns contribute zero
Annualisation:
Annualised Sortino = Sortino(period) × √T
Where: T = periods per year (252 daily, 52 weekly, 12 monthly, 4 quarterly)
Benefits of Using the Sortino Ratio
Rewards Asymmetric Strategies
Trend-following, momentum, and options-buying strategies with fat right tails look better on Sortino than on Sharpe, which is the fairer comparison for these styles.
Investor-Relevant Risk
Most investors define "risk" as losing money, not as volatility in general. Sortino aligns the math with that intuition by only penalizing shortfalls below the MAR.
Flexible Target Rate
The MAR can be 0%, the risk-free rate, or a personal hurdle rate — letting you tailor "downside" to your own goals instead of a fixed market benchmark.
Better Manager Comparison
Combine with the Portfolio Rebalancing Calculator to evaluate whether a manager's edge comes from genuine downside protection or just from taking more upside risk.
Tips for Accurate Sortino Calculation
Use Enough Data: Downside deviation is calculated from a subset of your returns (only the losing periods), so it needs more total observations than a Sharpe calculation to stay statistically stable — aim for 30+ periods.
Fix the MAR Before Comparing: Changing the MAR between two strategies you're comparing invalidates the comparison. Pick one MAR (commonly 0% or the risk-free rate) and apply it consistently.
Size Positions With Downside in Mind: A high Sortino Ratio still allows for large individual losses if they're infrequent. Pair with the Trade Risk Calculator to cap the size of any single downside event.
Common Mistakes
Cherry-Picking the MAR
Raising the MAR after seeing the results (to make more returns count as "downside" or fewer, depending on the desired narrative) turns the ratio into a marketing number instead of an analytical one.
Too Few Downside Observations
If only 2-3 periods in your sample fall below the MAR, the downside deviation — and therefore the whole ratio — is dominated by a tiny, noisy sample. Extend the lookback window before trusting the number.
Comparing Sortino Directly to Sharpe
Because Sortino only counts downside variance, it's mechanically higher than Sharpe for the same return stream in most cases. Compare Sortino to Sortino and Sharpe to Sharpe across strategies, not one against the other. Check our Stock Volatility Calculator to estimate total volatility for the Sharpe side of the comparison.
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OpenFrequently Asked Questions
What is the Sortino Ratio?
The Sortino Ratio measures risk-adjusted return using only downside volatility. It equals (Portfolio Return − Minimum Acceptable Return) / Downside Deviation. Unlike the Sharpe Ratio, it ignores upside swings, so a strategy with big gains and small losses scores higher on Sortino than on Sharpe.
How is the Sortino Ratio calculated?
First find the downside deviation: for each period return below your Minimum Acceptable Return (MAR), square the shortfall, average the squares, then take the square root. Divide (average return − MAR) by that downside deviation. Example: returns of 5%, -2%, 8%, -3% against a 0% MAR give a downside deviation of about 1.80% and a Sortino of roughly 1.1.
How does the Sortino Ratio compare to the Sharpe Ratio?
The Sharpe Ratio penalizes total volatility — both gains and losses. The Sortino Ratio only penalizes returns that fall below the MAR, so upside volatility (a good thing for investors) doesn't drag the score down. Use our Sharpe Ratio Calculator alongside this one to see how much upside variance is inflating or deflating your Sharpe number relative to Sortino.
What counts as a good Sortino Ratio?
On an annualised basis: below 0.5 is poor, 0.5–1.0 is below average, 1.0–2.0 is good, 2.0–3.0 is very good, and above 3.0 is excellent. Because it excludes upside volatility, Sortino values typically run higher than Sharpe for the same portfolio — don't compare the two numbers directly across strategies.
What should I use as the Minimum Acceptable Return (MAR)?
Common choices are 0% (any loss counts as downside), the risk-free rate (matching the Sharpe Ratio's Rf), or a personal target return like an inflation-adjusted hurdle rate. The MAR you choose changes which historical returns count as "downside," so keep it consistent when comparing Sortino across strategies or time periods.
What are common mistakes when using the Sortino Ratio?
Three big pitfalls: (1) using too few return observations — under 20-30 periods makes the downside deviation unstable; (2) silently changing the MAR between comparisons, which invalidates like-for-like analysis; (3) mixing period lengths, e.g. entering monthly returns but using an annual MAR without dividing it by 12 first.