Sortino Ratio
A reward-for-risk measure that only penalizes downside volatility, not upside swings.
Category: Optimizer & Performance
What is Sortino Ratio?
The Sortino ratio is excess return divided by downside deviation (volatility computed only from below-threshold returns). It is preferred over Sharpe when an investor genuinely cares about asymmetric outcomes.
Formula
Sortino = \frac{R_p - R_f}{\sigma_d}