Measure return relative to maximum drawdown, the risk measure investors actually experience.
The Calmar ratio divides excess return by maximum drawdown rather than volatility, which reflects the pain investors actually feel and abandon strategies over. It is widely used for managed futures and hedge funds. Volatility measures are symmetric and forgiving; maximum drawdown is what actually causes investors to sell at the bottom.
Calmar Ratio
Calmar Ratio = (portfolio return − risk-free rate) ÷ maximum drawdown
Calmar Ratio = (portfolio return − risk-free rate) ÷ maximum drawdown The Calmar ratio divides excess return by maximum drawdown rather than volatility, which reflects the pain investors actually feel and abandon strategies over. It is widely used for managed futures and hedge funds.
Volatility measures are symmetric and forgiving; maximum drawdown is what actually causes investors to sell at the bottom.
This calculator takes 3 inputs: Portfolio return, Risk-free rate, Maximum drawdown. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.