About the Sortino Ratio Calculator
This Sortino ratio calculator measures how much return an investment delivered for each unit of downside risk. Paste monthly, weekly, daily, quarterly or yearly returns, set your minimum acceptable return (MAR) — often 0% or the risk-free rate — and it annualizes the average return and the downside deviation, then divides one by the other. If you already know the annual return and downside deviation from a fact sheet, switch to summary mode.
The Sortino ratio is a refinement of the Sharpe ratio. Sharpe penalizes all volatility, so a fund with big upside months looks riskier than it feels. Sortino only counts returns that fall short of your target, which makes it a better fit for strategies with skewed returns, for retirees who care about shortfalls, and for comparing managers whose risk is mostly on the downside.
By default the downside deviation follows Sortino and Price’s definition: shortfalls below the per-period MAR are squared, summed and divided by the total number of observations (periods above target count as zero). An alternative divides only by the number of below-target periods, which some sources use; it gives a larger deviation and a lower ratio. Returns are annualized as mean × periods per year and deviation × √periods per year.
With the default inputs, the sortino ratio (annualized) is 1.6. Change any value above to recalculate instantly.
How to use the sortino ratio calculator
- 1Choose a list of returns or the annual summary figures.
- 2Paste periodic returns in percent and set how often they were measured.
- 3Enter your minimum acceptable return — 0% or the Treasury bill rate are common.
- 4Read the Sortino ratio; above 1 is decent and above 2 is strong.
- 5Compare it with the Sharpe-style ratio to see whether volatility is mostly upside or downside.
Formula and method
The numerator is the annualized return Rp — the mean periodic return times N periods per year — minus the annual minimum acceptable return. The denominator is the annualized downside deviation: each period’s shortfall below the per-period target m is squared (periods at or above target contribute zero), the squares are averaged over all n observations, square-rooted and multiplied by √N.
If you choose the "below-target periods only" option, the sum of squared shortfalls is divided by the number of below-target periods instead of n, producing a larger deviation. The Sharpe-style ratio shown for comparison uses the same excess return over total sample volatility.
- Rp
- Annualized portfolio return
- MAR
- Minimum acceptable (target) annual return
- DD
- Annualized downside deviation
- rᵢ
- Return in period i
- N
- Periods per year (12 monthly, 52 weekly, 252 daily)
Worked examples
Twelve monthly returns, 0% target
The returns average 0.558% a month, or 6.7% a year. Four months were negative (−2.4, −1.5, −3.0, −0.7); their squares sum to 17.5, and 17.5 ÷ 12 months gives a monthly downside deviation of 1.208%, or 4.18% annualized. Sortino = 6.7 ÷ 4.18 ≈ 1.60, well above the Sharpe-style 0.96.
Same returns against a 4% target
With a 4% annual target the monthly hurdle is 0.333%, so every negative month falls further short. Downside deviation rises to 4.80% and the excess return shrinks to 2.7%, cutting the Sortino ratio to about 0.56.
Quarterly returns, divisor = below-target periods
Four quarters average 1.4%, or 5.6% a year, against a 0.5% quarterly target (2% annual). Shortfalls of −3.7 and −2.3 square to 18.98; dividing by the two below-target quarters and taking the root gives 3.08%, or 6.16% annualized (× √4). Sortino = 3.6 ÷ 6.16 ≈ 0.58 — with the all-periods divisor it would be 0.83.
Frequently asked questions
What is a good Sortino ratio?+
As a rough guide, a Sortino ratio above 1 is acceptable, above 2 is good and above 3 is excellent. Because it ignores upside volatility it is usually higher than the Sharpe ratio for the same investment, so compare Sortino with Sortino rather than with Sharpe figures.
How is the Sortino ratio different from the Sharpe ratio?+
Both divide excess return by risk. Sharpe uses standard deviation, which counts large gains as risk. Sortino uses downside deviation, which only counts returns below a minimum acceptable return, so it rewards strategies whose volatility comes mainly from gains.
What minimum acceptable return should I use?+
Common choices are 0% (avoiding losses), the risk-free Treasury bill rate (beating cash) or a required return such as an inflation-plus target or a pension discount rate. Use the same MAR when comparing investments.
Why do different sites give different Sortino ratios?+
Formulas differ in the divisor for downside deviation (all periods versus only below-target periods), whether returns are annualized arithmetically or geometrically, and the target used. This calculator lets you switch the divisor and shows its method so you can match a source.
What happens if no returns fall below the target?+
Downside deviation is then zero and the ratio is mathematically undefined. In practice it signals a short or unusually smooth track record; extend the history or raise the target to get a meaningful figure.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.