Sharpe, Sortino & Information Ratios Calculator

Sharpe, Sortino, and Beyond: What Your Risk-Adjusted Ratios Reveal

You've just run the numbers—and the results are in. Your portfolio's performance has been broken down using a suite of risk-adjusted return metrics: Sharpe Ratio, Sortino Ratio, Information Ratio, and possibly Treynor and Calmar if you toggled on the advanced metrics. These figures help paint a clearer picture of how much return you're earning for each unit of risk you're taking.

But seeing the numbers is just the first step. Here's what they really mean for your trading strategy—and where you might want to proceed with confidence or caution.

Signals to Watch in Your ATR Output

The tool evaluated your portfolio's efficiency using volatility, downside risk, and benchmark-relative performance. Below are the key highlights from the output:

• Sharpe Ratio: At 1.24, your return per unit of total volatility is classified as "Good."
• Sortino Ratio: A reading of 1.85 signals stronger performance when only downside risk is considered.
• Information Ratio: Scoring 0.76 against your benchmark shows moderate outperformance—but it's not statistically significant over your selected time frame.
• Treynor Ratio (if available): With a ratio of 13.75 and a beta of 0.85, you're capturing solid returns for each unit of market risk.
• Calmar Ratio (if enabled): A result of 0.52 suggests you're generating modest returns relative to your portfolio’s maximum historical drawdown.

Sharpe Ratio: The Risk Premium Scorecard

The Sharpe Ratio is the workhorse of risk-adjusted metrics—it's a way to standardize returns against the level of volatility taken on. Your Sharpe score of 1.24 implies you're earning 1.24% of excess return (above the risk-free rate) for every 1% of total risk. That's generally considered strong, particularly when it meets the statistical threshold for significance over a 3-year observation period.

• Why it matters: A Sharpe above 1.0 is attractive for multi-asset portfolios and active managers alike.
• Statistical support: Your Sharpe passed the significance test at a 95% confidence level, reinforcing its reliability.
• Tip: If you're optimizing a portfolio, aim for Sharpe levels above 1.0 and ensure a sufficient time horizon (3+ years) to validate performance.

Why Sortino Might Matter More

Unlike Sharpe, the Sortino Ratio doesn’t penalize upside volatility—just downside. That distinction makes it more appealing for traders who care more about avoiding losses than smoothing out gains. Your ratio of 1.85 points to strong protection against downside moves, especially since it’s higher than the Sharpe.

• When to prioritize Sortino: If your strategy involves options, leveraged ETFs, or growth tech where volatility skews upward.
• Implication: Higher Sortino than Sharpe generally signals favorable asymmetry—more positive surprises than negative ones.
• Practical tip: Track Sortino over time to identify deterioration in downside protection during volatile market regimes.

Benchmarking with the Information Ratio

Your Information Ratio sits at 0.76—a middling result, meaning your portfolio slightly outperforms its benchmark on a risk-adjusted basis. However, the lack of statistical significance (p = 0.12) throws a bit of cold water on the enthusiasm.

• Key takeaway: You're outperforming, but not with enough consistency to rule out random chance.
• Improvement angle: Focus on reducing tracking error or increasing alpha relative to your benchmark.
• If you manage a fund: An Information Ratio over 0.8 is generally considered acceptable; over 1.0 is strong.

Additional Metrics: Treynor and Calmar Ratios

If you opted into advanced metrics, the Treynor and Calmar Ratios offer deeper insights:

• Treynor Ratio: At 13.75, you're doing well relative to systematic (market) risk. With a beta below 1.0, this is especially noteworthy.
• Calmar Ratio: A 0.52 suggests your return isn’t significantly higher than your worst-case historical loss. It’s moderate, not alarming—but worth watching.

What to Be Cautious About

Not every number glows green. Here are some areas to monitor:

• Non-significant Information Ratio: A moderate result that lacks statistical backing may not be dependable over time.
• Drawdowns: If your Calmar is low and drawdowns high, your capital preservation needs attention.
• High beta (if applicable): Anything above 1.2 suggests higher market risk, which may explain volatility in returns.

Steps to Sharpen Your Edge

Your output provides valuable signals—but the ratios are only as useful as the action they inspire:

• Consider increasing your observation window to improve significance.
• Benchmark against portfolios with similar volatility profiles.
• Use Sortino when prioritizing downside protection; Sharpe for general portfolio ranking.
• Apply scenario stress testing if Calmar or drawdowns raise red flags.

Next Steps with Your Risk-Adjusted Metrics