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Calmar Ratio Calculator

Measure return against worst-case loss with the Calmar ratio.

How it is calculated

The ratio divides annualized return, less an optional risk-free rate, by maximum drawdown: Calmar = (R − Rf) ÷ D. R is the annualized return in percent (negative allowed) and D is the maximum drawdown in percent, the largest peak-to-trough fall in the period, entered as a positive number. Rf is the risk-free rate in percent; it defaults to 0, which gives Terry Young's original raw-return ratio, while entering a rate (for example a Treasury bill yield) gives the excess-return form some references use. Both figures are used as percentages, so the percent signs cancel and the result is a plain number rounded to two decimals. If the drawdown is zero or negative the tool shows no result, because the ratio is undefined. The tool does not choose the measurement window; use the same period for the return and the drawdown.

Worked example

A fund returned 18% per year and its worst peak-to-trough decline over the same period was 12%. Divide 18 by 12: the Calmar ratio is 1.50. This means each percentage point of worst-case loss was matched by 1.5 points of annual return. With the same drawdown, a return of -6% would give -0.50.

Try this example →

Common mistakes

  • Entering the drawdown as a negative number (-12). The tool needs it positive and returns nothing otherwise.
  • Using total cumulative return instead of the annualized return. A 3-year total of 60% is not 60% per year.
  • Taking the drawdown from a different period than the return, which makes the two numbers incomparable.
  • Entering decimals as fractions (0.18 and 0.12) for one input and percents for the other. The ratio only stays correct when both use the same scale.
  • Using a very short window. A calm month can give a tiny drawdown and an inflated ratio that says little about risk.

Sources

About this calculator

The Calmar ratio measures risk-adjusted performance by dividing a portfolio's annualized return by its maximum drawdown — the largest peak-to-trough decline in value over the measurement period (typically the trailing 3 years). A Calmar ratio of 2 means the strategy earned twice its worst historical loss in annualized return; higher is better, and unlike the Sharpe ratio it focuses purely on the worst-case loss investors actually experienced rather than overall volatility. By default this tool uses Terry Young's original raw-return form (risk-free rate 0); some references, such as CFI, subtract the risk-free rate from the return first, so enter a risk-free rate to get that excess-return variant.

The ratio was developed by Terry W. Young for evaluating commodity trading advisors (CTAs) and is now widely used across hedge funds, managed futures funds and systematic trading strategies, where large drawdowns are a bigger practical concern than day-to-day variance. Fund managers and allocators use it to compare strategies on a "return per unit of pain" basis and to size positions or allocate capital toward funds with better drawdown-adjusted track records.

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Comments (1)

  • Editorial team

    The ratio rests on one event, the single worst drawdown in the window, so changing the window can change the answer a lot. Run the same fund over a period that includes a crash and one that does not, and compare the two figures before comparing funds. When you rank funds against each other, use the same window and the same risk-free choice for all of them. Which period do you usually measure over, and do you include a risk-free rate?

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