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## Sortino Ratio of an Asset

by QuantShare, 4388 days ago

The Sortino ratio is a popular measure of the risk of an asset, investment, portfolio or strategy. Its formula resembles the one that describes the Sharpe ratio with a small variation that consists of penalizing only negative returns.

Sortino ratio uses the downside standard deviation instead of the classic standard deviation. The downside deviation, also called downside risk, treats positive and negative deviations differently unlike the standard deviation. The formula is calculated only based on returns that are lower than the mean and thus it takes into account only negative deviations because it is the main concern of traders and investors.

The Sortino ratio of a strategy is automatically calculated in the simulation report when you backtest a trading system.

The current indicator was created to measure the risk of a single asset (daily period). It may also be applied to indices and composites.

This trading indicator has two parameters. The first one allows you to specify a time-series (The close price is generally used). The second parameter determines the lookback period or the number of past bars to use in the calculation.

Example:
a = sortino(close, 90);

The Sharpe ratio function is already included in QuantShare. Here is how to calculate the 90-bar Sharpe ratio of a security:
a = sharpe(close, 90);

What is this?

 Type: Trading Indicator Object ID: 1146 Country: All Market: All Style: Technical Analysis

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