Sharpe penalizes a fund for jumping upwards; Sortino doesn't. When Sortino is much higher than Sharpe, the fund's volatility is mostly good volatility.
For the formula and the constants behind this figure, see Methodology.
Guides that use Sortino ratio
2 guides put this term to work.
- Sharpe and Sortino: measuring risk-adjusted returnsVolatility, Sharpe, Sortino and maximum drawdown measure four different things, and only one of them predicts whether you will still be holding in year three.
- Treynor and information ratio: advanced tools for comparing fundsOne prices market risk, the other prices the decision to differ from the index. For choosing between active funds in one category, the information ratio is the most relevant number on the page.
More on risk
How rough the ride was — the half of the story a return number hides.
- Standard deviation
- How much daily returns scatter around their average, annualized. Trailing 3 years.
- Maximum drawdown
- The largest peak-to-trough fall the fund has ever had, over its full history.
- Sharpe ratio
- Return above the risk-free rate, per unit of total volatility.
- Riskometer
- A six-step risk label from Low to Very High, in SEBI's format.