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Sortino Ratio Calculator

Measure risk-adjusted return using only downside volatility.

How it is calculated

The tool computes Sortino = (R − T) / D, where R is the portfolio return in percent, T is the target or minimum acceptable return in percent, and D is the downside deviation in percent over the same period. It also shows the excess return R − T.

If you leave the target empty it is taken as 0. The downside deviation must be greater than zero, otherwise there is no result. The tool does not calculate the downside deviation for you, and it does not annualise anything: return and deviation must already cover the same period (both annual, or both monthly).

Worked example

A fund returned 12% in the year, the target is 2%, and the downside deviation is 8%. The excess return is 12 − 2 = 10.00%. Dividing by the downside deviation gives 10 / 8 = 1.25, so the Sortino ratio is 1.25: 1.25 units of excess return per unit of downside risk.

Try this example →

Common mistakes

  • Entering the ordinary standard deviation instead of the downside deviation. That mixes in upside swings and gives a Sharpe-style number.
  • Mixing periods, such as an annual return with a monthly downside deviation, which makes the ratio meaningless.
  • Typing decimals (0.12) when the fields expect percent values (12).
  • Comparing Sortino ratios computed with different targets; the choice of target changes both the excess return and the downside deviation.

Sources

About this calculator

The Sortino ratio measures risk-adjusted return the way the Sharpe ratio does, but it only penalizes downside volatility — the standard deviation of returns that fall below a chosen target (often the risk-free rate or zero). It's calculated as (portfolio return − target return) ÷ downside deviation. Because upside swings aren't treated as "risk," a strategy with big gains and small losses scores much better on the Sortino ratio than on the Sharpe ratio, which punishes all volatility equally.

Portfolio managers, hedge funds and quantitative analysts use the Sortino ratio to evaluate strategies where upside variance is desirable — options-selling, trend-following or asymmetric-payoff strategies are common examples. A higher Sortino ratio means better return per unit of harmful, downside-only risk.

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Comments (1)

  • Editorial team

    Both return and downside deviation are typed in by you, so they must describe the same period: an annual return divided by a monthly deviation will flatter the ratio badly. Leave the target empty and it is taken as zero. Two funds are only comparable if you used the same target and the same time span for each. The deviation has to be above zero for a result. How are you getting your downside deviation figure?

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