Measure
Sortino ratio
Excess return per unit of downside deviation only. Formula: Sortino = (R_p − target) / σ_downside.
Definition
Excess return per unit of downside deviation only.
Formula
Sortino = (R_p − target) / σ_downside
How to read it
It answers the Sharpe objection by penalising only returns below a chosen target.
Measured on real funds
16Both ratios on the same funds over the same months, so the difference between them is visible rather than asserted. Sharpe divides excess return by all volatility; Sortino divides it by downside volatility only. Risk-free proxy is BIL at 1.38% annualised.
| Fund | Sortino | Sharpe |
|---|---|---|
| VOO | 1.55 | 0.95 |
| SCHD | 1.48 | 0.89 |
| VGT | 1.14 | 0.70 |
| VUG | 1.03 | 0.66 |
| VIG | 1.02 | 0.68 |
| VTV | 0.85 | 0.58 |
| VTI | 0.81 | 0.55 |
| VT | 0.66 | 0.46 |
| QQQ | 0.6 | 0.40 |
| XLK | 0.59 | 0.39 |
| AGG | 0.56 | 0.37 |
| VXUS | 0.53 | 0.36 |
| BND | 0.52 | 0.35 |
| SMH | 0.45 | 0.30 |
| VWO | 0.44 | 0.30 |
| VEA | 0.32 | 0.23 |
Computed from Yahoo Finance monthly total return, recomputed with every update of the site. How these figures are produced.
What it does not tell you
Downside deviation is estimated from fewer observations than total volatility, so the figure is noisier and moves around with the target you pick. The choice of target is rarely disclosed.
Applied in 2 articles
2Every figure computed with this measure on this site follows the conventions set out in the methodology. All measures →