Sharpe's cousin that only punishes downside.
Backward-looking and sample-dependent, like Sharpe — easy to inflate with a short lucky sample.
Educational tool only — not financial advice. Verify figures with your broker.
The Sortino Ratio Calculator is a risk-adjusted return tool that answers: how much return did a strategy earn per unit of downside (harmful) volatility? Unlike Sharpe, it only penalizes returns below your target, so upside swings don't count against the score. It reports a per-period and an annualized Sortino for the sample you enter.
Sortino = (average return per period − target return per period) ÷ downside deviation, where downside deviation is the standard deviation computed only from returns that fell below the target. The per-period figure is annualized by multiplying by the square root of periods per year. Because it excludes upside moves from the denominator, a strategy with big winners scores higher on Sortino than on Sharpe.
Sharpe penalizes all volatility; the Sortino ratio calculator only penalizes downside volatility below your target return. Sortino is usually the higher of the two for strategies whose big moves are mostly gains.
There's no universal threshold, but Sortino is typically higher than the same strategy's Sharpe because it ignores upside swings. Judge it against the same strategy's Sharpe and against a long, honest sample rather than a single number.
Take only the periods where your return fell below the target, square each shortfall, average those, and take the square root. Many backtest and spreadsheet tools output it directly.
Keep in mind: Like Sharpe, the Sortino ratio is backward-looking and sample-dependent — it is easy to inflate with a short lucky run and it tells you nothing about whether the strategy will keep working.