Sortino ratio


A variation of the Sharpe ratio which differentiates harmful volatility from volatility in general by replacing standard deviation with downside deviation in the denominator. Thus the Sortino Ratio is calculated by subtracting the risk free rate from the return of the portfolio and then dividing by the downside deviation. The Sortino ratio measures the return to "bad" volatility. This ratio allows investors to assess risk in a better manner than simply looking at excess returns to total volatility, since such a measure does not consider how often the price of the security rises as opposed to how often it falls.
A large Sortino Ratio indicates a low risk of large losses occurring.

Use Sortino ratio in a sentence

You should try and find a way to break down the sortino ratio to figure out new ways to make it work for you.

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Our company assesses risk using the sortino ratio which allows us to measure the return to bad volatility for our clients.

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The Sortino ratio was used to give us a better picture of the stability or instability of the market as we were very concerned.

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