Sortino ratio in mutual funds

Tue, 12 May 2026 00:00:00 +0000

The Sortino ratio is a risk-adjusted performance measure that refines the Sharpe ratio by substituting total standard deviation with downside deviation, a measure computed only from returns that fall below a minimum acceptable return (MAR), typically the risk-free rate or zero. The intuition is straightforward: investors are harmed by downside volatility but benefit from upside volatility, so penalising both equally (as the Sharpe ratio does) misrepresents the true cost of risk.

Downside Deviation on WebNotes

Sortino ratio in mutual funds