Sortino Ratio Calculator

How to use the Sortino ratio calculator

What this calculator does

This calculator estimates the Sortino ratio for two assets using each asset's average return, one shared minimum acceptable return, and its downside deviation. The result answers a focused question: how much return above your target was earned per unit of harmful, below-target volatility? It is a historical comparison measure, not a forecast, portfolio recommendation, or complete risk assessment. It does not account for liquidity, drawdown duration, tail losses, fees, taxes, changing correlations, or whether the return data are representative.

When to use it

Use the calculator to compare two funds or strategies measured over the same period, review whether a higher-return asset also delivered better downside-adjusted performance, test how a different required return changes the ranking, or document a consistent comparison for an investment memo. The ratio is most useful when upside volatility should not be treated as a penalty. The CFA Institute explanation of the Sortino ratio provides additional context on using a minimum acceptable return and downside deviation.

How to calculate

1. Start with the ready-to-use example. The page opens with complete data and an immediately available Excel workbook.
2. Replace the Minimum acceptable return (MAR) with the benchmark or target for the same frequency as your return data.
3. Enter each asset's average return and downside deviation. Results update live.
4. Read the two ratios, excess returns, leader, and comparison table. Use the same time basis for every percentage.
5. Select Download Excel to export the current validated inputs and results. Reset clears the demonstration values and may disable export until a complete valid state is entered again.

Input guide

Minimum acceptable return (MAR) is required and accepts a signed percentage from -100% to 1,000%, using a dot as the decimal separator; 2.00 is a realistic annual target. Raising MAR reduces both assets' excess return and therefore lowers both Sortino ratios. Do not mix an annual target with monthly returns. Asset 1 average return and Asset 2 average return are required signed percentages over the same period; examples are 11.00% and 9.00%. Higher average return increases the ratio when all else is unchanged. Avoid entering a cumulative multi-year return as though it were an annual arithmetic mean. Asset 1 downside deviation and Asset 2 downside deviation are required positive percentages above zero and no more than 1,000%; examples are 6.00% and 8.00%. A larger downside deviation lowers the ratio. Zero is rejected because division by zero would make the ratio undefined. Downside deviation should be calculated relative to the same target and frequency used here.

Output guide

Asset 1 Sortino ratio and Asset 2 Sortino ratio are unitless estimates calculated from excess return divided by downside deviation. Positive values mean average return exceeded MAR; zero means average return exactly matched MAR; negative values mean it fell short. Asset 1 excess return and Asset 2 excess return are percentage-point differences between average return and MAR. Best Sortino ratio, Leader, and the summary pills identify the numerically higher ratio; equal ratios are shown as a tie. The Asset comparison table repeats every canonical input and output so you can audit the arithmetic. A high ratio can still accompany substantial absolute losses or limited data, so use it alongside drawdown and distribution analysis.

Worked example

The startup example uses a 2.00% MAR. Asset 1 has an 11.00% average return and 6.00% downside deviation, so its excess return is 11.00% – 2.00% = 9.00%, and its Sortino ratio is 9.00 ÷ 6.00 = 1.50. Asset 2 has a 9.00% average return and 8.00% downside deviation, producing 7.00% excess return and a ratio of 0.875, displayed as 0.88. Asset 1 therefore leads because it generated more excess return per unit of measured downside deviation.