Sortino Ratio Calculator
The Sortino ratio measures how much return a portfolio earns per unit of downside risk. Unlike the Sharpe ratio, which penalises all volatility, the Sortino ratio only counts volatility on the losing side — below a target return.
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Higher is better; penalises only downside volatility, not upside
- 1
Excess return over target
12% − 0% = 12% - 2
Sortino ratio
12% ÷ 8% = 1.5000Excess return divided by downside deviation — upside volatility is not penalised.
How does this calculator work?
Sortino ratio = (Rp − Rt) / σ_downside, where σ_downside is the standard deviation of returns that fall below the target Rt. Unlike Sharpe, it ignores upside volatility. A ratio ≥ 2 is generally considered good; ≥ 3 is excellent. Enter average return, target return and downside deviation to compute it.
Formula
How this is calculated
The Sortino ratio was developed by Frank A. Sortino as a refinement of the Sharpe ratio. The key difference is the denominator: Sharpe uses total standard deviation (punishing upside swings equally with downside ones), while Sortino uses only the downside deviation — the root-mean-squared shortfall of returns below a target or minimum acceptable return (MAR). Upside variability is not penalised, which better reflects how investors actually experience risk.
The downside deviation σ_down is computed as the square root of the average squared shortfall for periods where the return fell below the target: σ_down = √[Σ min(Ri − T, 0)² / n]. In practice, financial platforms compute this from a return series; this calculator accepts σ_down as a direct input so you can use the figure from your portfolio analytics software or factor it from historical data.
As a rule of thumb: a Sortino ratio below 0 means returns are below target; 0–1 is sub-adequate; 1–2 is acceptable; above 2 is good; above 3 is excellent. These thresholds are informal — absolute values depend on the investment universe and the target return chosen.
Frequently asked questions
Downside deviation is the standard deviation computed using only the returns that fall below the target (MAR). Returns above the target are treated as zero shortfall. It is often much smaller than the total standard deviation for positively-skewed return series.
Common choices are 0% (any loss is penalised), the risk-free rate, or a required minimum return such as an inflation target. Using 0% gives the most conservative Sortino; using the risk-free rate makes it more comparable to the Sharpe ratio.
Both measure excess return per unit of risk. For strategies with symmetric return distributions they are proportional (Sortino ≈ √2 × Sharpe). Sortino is more favourable for positively-skewed strategies (e.g. trend-following) and more penalising for negatively-skewed ones (e.g. short volatility).
Also known as
TG we-Calculate Editorial Team. (2026). Sortino Ratio Calculator [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/sortino-ratio-calculator
TG we-Calculate Editorial Team. "Sortino Ratio Calculator." TG we-Calculate. 2026. https://we-calculate.com/calculator/sortino-ratio-calculator.
TG we-Calculate Editorial Team, "Sortino Ratio Calculator," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/sortino-ratio-calculator
@misc{wecalculate_sortino_ratio_calculator, title = {Sortino Ratio Calculator}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/sortino-ratio-calculator}}, year = {2026}, note = {TG we-Calculate} }
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