Calmar Ratio

Learn about the Calmar Ratio, and download an Excel spreadsheet to calculate this performance benchmark.

The Calmar Ratio is a performance benchmark commonly used to gauge the risk effectiveness of hedge funds. In common with the Sortino Ratio, it’s a downside risk‐adjusted performance measure. Unlike the Sortino Ratio (which uses downside deviation as a proxy for risk), it employs the maximum drawdown to penalize risk.

The Calmar Ratio was originally developed by Terry Young, with the name being an abbreviation for CALifornia Managed Accounts Reports (a contraction of his company name, and the name of his newsletter). He considered it a superior performance benchmark because it attenuates overperformance and underperformance, and changes gradually.

The Calmar Ratio is equal to the compounded annual growth rate divided by the maximum drawdown.

Calmar Ratio

The maximum drawdown is the maximum peak to trough of the returns, and is typically measured over a three year period.

Fundamentally, the maximum drawdown indicates the greatest loss an investor could suffer if an investment is bought at its highest price, and sold at the lowest.  In employing the maximum drawdown as a proxy for risk, the Calmar Ratio is considered a good indicator of the emotional pain an investor could feel if the the stock market suddenly swings downwards.

This paper discusses how the maximum drawdown can be scaled to compare hedge funds with different historical track records of different lengths.

Higher values of the Calmar Ratio are better, because they indicate stocks whose uptrend is more significant than the medium term downward swings.  A Calmar Ratio of

  • 1 or higher is considered good,
  • 3 or higher is considered excellent,
  • and 5 or higher indicates excellent performance

Calmar Ratio in Excel

This Excel spreadsheet calculates the Calmar Ratio for the S&P500 over a three year period from October 24th 2008.
Calculate the Calmar Ratio with Excel

The S&P500 closing price was retrieved using this spreadsheet to automatically download stock quotes into Excel.  The spreadsheet can be easily adapted for other investments across other time periods.

Download Excel Spreadsheet to Calculate the Calmar Ratio

2 thoughts on “Calmar Ratio”

  1. Hi

    Thank you for your nice website. I noticed an error in your Calmar calculation, the maxdrawdown range should go from MIN(E7:E761)

    Best Regards


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