Modern Finance SortinoRatio

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SortinoRatio

Returns the annualized return above a target per unit of downside deviation.

Syntax

SortinoRatio( periodReturns( ), targetPerPeriod, frequency )

Examples

#import "std/money"
using money

'' Sharpe's cousin, dividing by DOWNSIDE deviation instead of total
'' volatility -- so a portfolio is not penalised for rising sharply.
dim as float64 r( 0 to 11 ) = { 0.02, -0.01, 0.03, 0.015, -0.025, 0.04, _
                               0.01, -0.005, 0.02, 0.03, -0.015, 0.025 }
dim as float64 b( 0 to 11 ) = { 0.018, -0.012, 0.025, 0.012, -0.02, 0.035, _
                               0.008, -0.004, 0.018, 0.028, -0.012, 0.022 }

print SortinoRatio( r( ), 0.0, RETURN_MONTHLY ).Value( )         '' 4.323460152737352

'' It EXCEEDS Sharpe here, and must: this series has more upside
'' volatility than downside, which is exactly what Sortino ignores.
dim as boolean higher = ( SortinoRatio( r( ), 0.0, RETURN_MONTHLY ).Value( ) > _
                          SharpeRatio( r( ), 0.0, RETURN_MONTHLY ).Value( ) )
print higher                             '' true

'' Never below target means no downside deviation and so no ratio.
dim as float64 up_( 0 to 3 ) = { 0.01, 0.02, 0.01, 0.03 }
print SortinoRatio( up_( ), 0.0, RETURN_MONTHLY ).Failure( ).Message( )

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Library: Finance
Category: Finance
Documented under: Nothing Becomes A Keyword
Source: pkg/std/money/finport.tiko in the tiko repository.