 Previous Page

# Sortino Ratio AnalyticsTrade Team Last updated on 26 Apr 2023

# Sortino Ratio

The Sortino Ratio is a financial metric used to measure the risk-adjusted return of an investment. It is a variation of the Sharpe Ratio, which is used to measure the risk-adjusted return of a portfolio. The Sortino Ratio is calculated by subtracting the risk-free rate of return from the portfolio’s return and dividing it by the downside deviation. The downside deviation is a measure of the volatility of the portfolio’s returns that fall below a certain target rate of return. The Sortino Ratio is used to compare the performance of different investments and to assess the risk-adjusted return of a portfolio.

## History of the Sortino Ratio

The Sortino Ratio was developed by Frank Sortino and Marvin Appel in the early 1990s. It was designed to measure the risk-adjusted return of a portfolio by taking into account the downside risk of the portfolio. The Sortino Ratio is an improvement on the Sharpe Ratio, which only takes into account the total volatility of the portfolio’s returns. The Sortino Ratio is a more accurate measure of risk-adjusted return because it takes into account the downside risk of the portfolio.

## Comparison Table

Metric Sharpe Ratio Sortino Ratio
Calculation Portfolio Return – Risk-Free Rate / Portfolio Volatility Portfolio Return – Risk-Free Rate / Downside Deviation
Risk Measurement Total Volatility Downside Risk

## Summary

The Sortino Ratio is a financial metric used to measure the risk-adjusted return of an investment. It is a variation of the Sharpe Ratio, which is used to measure the risk-adjusted return of a portfolio. The Sortino Ratio is calculated by subtracting the risk-free rate of return from the portfolio’s return and dividing it by the downside deviation. The downside deviation is a measure of the volatility of the portfolio’s returns that fall below a certain target rate of return. For more information about the Sortino Ratio, you can visit Investopedia, Morningstar, and Seeking Alpha.

• Sharpe Ratio
• Treynor Ratio
• Jensen’s Alpha
• Information Ratio
• Beta
• Alpha
• Standard Deviation
• Risk-Free Rate
• Downside Deviation
• Portfolio Volatility

#### Do you like the post? Share it now: 