Sortino Ratio Calculator
The Sortino ratio improves on the Sharpe ratio by recognising that investors dislike downside risk (losses) but are not concerned about upside volatility (large gains). By dividing excess return by downside deviation rather than total standard deviation, the Sortino ratio gives a fairer picture of risk-adjusted performance for strategies with asymmetric return distributions. You can enter individual period returns (monthly or annual) as a comma-separated list, along with your target (minimum acceptable) return. The calculator automatically computes the mean return, downside deviation, and Sortino ratio. Alternatively, you can enter summary statistics directly if you already know the mean return, target, and downside deviation.
Sortino ratio formula
Sortino Ratio = (Mean Return - Target Return) / Downside Deviation
Downside Deviation = sqrt(mean(min(0, R_i - Target)^2)) for each period i
Only returns below target contribute to downside deviation
Mean return and target should be expressed in the same period terms (e.g., both monthly or both annual).
Sortino vs. Sharpe comparison
- Sortino is preferred when a strategy has positive skew (rare large gains, frequent small losses).
- Sharpe penalises upside volatility equally to downside; Sortino does not.
- If a strategy has symmetric return distribution, Sortino and Sharpe rankings are similar.
- Sortino ratios are numerically higher than Sharpe ratios for the same strategy (denominator is smaller).
- Do not compare a Sortino ratio directly to a Sharpe ratio: they are not on the same scale.
Sortino ratio: frequently asked questions
What is the Sortino ratio?
The Sortino ratio is a variation of the Sharpe ratio that only penalises downside volatility (returns below a minimum acceptable return or target). It is computed as (Portfolio Return - Target Return) / Downside Deviation. Upside volatility is not penalised since most investors welcome returns above target.
How does the Sortino ratio differ from the Sharpe ratio?
The Sharpe ratio divides excess return by total standard deviation (both upside and downside). The Sortino ratio divides excess return by downside deviation only. For strategies with positive skewness (frequent small losses but large occasional gains), the Sortino ratio is often higher than the Sharpe ratio and may be more representative.
What is downside deviation?
Downside deviation is the standard deviation of returns that fall below the target return (or risk-free rate). Only negative deviations from the target are squared and averaged; positive deviations are set to zero. It measures the volatility of losses without penalising gains.
What target return should I use?
Common choices for the target return (minimum acceptable return, or MAR) include: zero, the risk-free rate, inflation, or a benchmark return. Using zero means you only care about actual losses. Using the risk-free rate aligns with the Sharpe ratio's risk premium concept.
What Sortino ratio is considered good?
A Sortino ratio above 2.0 is generally considered good; above 3.0 is excellent. Because downside deviation is typically lower than total standard deviation, Sortino ratios are usually numerically higher than Sharpe ratios for the same strategy. Compare Sortino ratios only against other Sortino ratios, not Sharpe ratios.
Official sources
- U.S. Treasury: Treasury Yield Data (Risk-Free Rate).
- SEC: Investment Risk Overview.
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.