Measuring performance
Calmar ratio
Annualised return divided by the worst drawdown — return per unit of pain.
How it works
Calmar uses maximum drawdown as its risk measure rather than volatility, which makes it closer to how investors actually experience risk.
It is popular for evaluating trend-following and managed-futures strategies, where deep drawdowns are the defining risk.
Where it misleads people
Maximum drawdown depends heavily on the sample period, so Calmar is unstable and very sensitive to whether the window includes a crash.
Formula
Calmar = CAGR ÷ absolute value of maximum drawdownRelated terms
- Maximum drawdownThe largest peak-to-trough fall a portfolio or strategy suffered over the period examined.
- Sharpe ratioReturn above the risk-free rate, divided by volatility — how much return each unit of risk bought.
- CAGRThe steady yearly rate that would have turned your starting value into your ending value.
More in Measuring performance
- Contribution to return
- Equity risk premium
- Benchmark
- Information ratio
- Behaviour gap
- Look-ahead bias
- Backtest
- Mark to market
All 29 Measuring performance terms · The full glossary, 433 terms
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