MONEY GLOBE XProfessional Risk Management · Lesson 4
Measuring performance: Sharpe and Sortino
Return per unit of risk
Professional - Gold & Platinum
In this lesson
Compare strategies by risk-adjusted return using the Sharpe, Sortino and Calmar ratios.
Key takeaways
- Sharpe = (return − risk-free rate) ÷ volatility.
- Sortino uses only downside volatility; Calmar = annual return ÷ maximum drawdown.
- A higher return is not better if it took far more risk.
- Over several years a Sharpe above ~1 is good; very high values on short tests are suspicious.
Watch this lesson with Tessa. The full video, worked example, calculator, quiz and Ask Tessa are part of Money Globe X Gold and Platinum. Create your account to start learning.
Next lesson: The Kelly criterion
Educational information only - not financial advice.
Create your free account
Free lessons, live markets and the Classroom. Founding members get their first year at a founding price - applied automatically at checkout.