Portfolio Risk & Return

Sortino Ratio

A variation on the Sharpe ratio that counts only the bad kind of volatility. Where Sharpe divides the return above the risk-free rate by all of the portfolio’s swings, up and down, Sortino divides it by downside deviation — the swings on the days the portfolio lost money. Few investors mind a portfolio that jumps upward, so Sortino is closer to how risk actually feels. Higher is better. A Sortino well above the Sharpe ratio suggests more of the swinging happened on the way up than on the way down; the two sitting close together means the swings were more evenly split. Like Sharpe, it looks backward and depends on the window measured.

Educational information, not investment advice. See it applied across the screener →