Sortino ratio calculator
Enter your annualized return, a target (or risk-free) return and your annualized downside deviation to get the Sortino ratio instantly — the risk-adjusted score that only counts the volatility that actually hurts, with a plain-English read on whether it's weak, strong or too good to trust.
What is the Sortino ratio?
The Sortino ratio measures how much excess return a strategy earns for each unit of downside risk it takes. It is a refinement of the Sharpe ratio that swaps total volatility for downside deviation — the volatility of only the returns that fall below your target:
Sortino = (Return − Target) ÷ Downside deviation
What is a good Sortino ratio?
- < 1.0 — weak; the returns don't justify the downside.
- 1.0–2.0 — decent and realistic for a real, tradable edge.
- 2.0–3.0 — strong.
- > 3.0 — excellent, and a red flag: on a backtest it usually means the strategy is overfit, the costs are unrealistic, or there's look-ahead bias.
Because it ignores upside swings, the Sortino ratio typically reads a little higher than the Sharpe ratio on the same strategy — so judge it against these Sortino bands, not Sharpe ones.
Sortino vs Sharpe
The Sharpe ratio penalises all volatility, up and down alike — which unfairly punishes a strategy for its big winning months. Sortino fixes that by only counting harmful downside deviation. That makes it a fairer measure for asymmetric, positively-skewed strategies — trend-following, long-option, or anything that takes many small losses in exchange for occasional large gains. Read the two together: compute the Sharpe ratio here and compare.
The catch: a backtested Sortino inflates too
Everything that makes a backtested Sharpe untrustworthy applies to Sortino. Tune enough parameters and you can manufacture a sky-high Sortino on historical data that falls apart live. The honest correction is the Deflated Sharpe ratio, which discounts your score for how many variations you tried — the more combinations you tested, the more luck is baked into the winner. Here's why a high ratio can lie.
QUANTHEON Lab runs that haircut for you, alongside out-of-sample Walk-Forward and 1,000-path Monte-Carlo, and fuses them into one verdict: trustworthy, fragile or curve-fit.
FAQ
What is the Sortino ratio?
The Sortino ratio measures excess return per unit of downside risk: (return − target) ÷ downside deviation. Unlike Sharpe, it only penalises the volatility that falls below your target, not upside swings.
Sortino vs Sharpe — which is better?
Neither is strictly better; they answer different questions. Sortino ignores upside volatility, so it flatters strategies with big positive swings. Use both, and be more suspicious the further either sits from what survives out-of-sample.
What is a good Sortino ratio?
Because it excludes upside, Sortino reads a bit higher than Sharpe. As a guide: below 1 is weak, 1–2 decent, 2–3 strong, above 3 excellent — and on a backtest, worth checking for overfitting.
Related: Sharpe ratio calculator · Max drawdown calculator · What is overfitting?