Sortino Ratio
Sortino Ratio — A variant of Sharpe ratio that only penalises downside volatility — usually preferred over Sharpe.
- Quick definition: A variant of Sharpe ratio that only penalises downside volatility — usually preferred over Sharpe.
- Category: Performance Metrics
Full Definition
Sortino is Sharpe but only counts negative returns in the volatility calculation. A strategy with high upside swings and stable downside has a higher Sortino than Sharpe. Most quants prefer Sortino because traders care about losses, not "volatility" in general. A Sortino above 1.5 is considered strong.
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