What Is the Calmar Ratio?

The Calmar ratio is a gauge of the performance of investment funds such as hedge funds and commodity trading advisors (CTAs). It is a function of the fund's average compounded annual 澳洲幸运5官方开奖结果体彩网:rate of return versus its maximum drawdown. The higher the Calmar ratio, the better it performed on a 澳洲幸运5官方开奖结果体彩网:risk-adjusted basis during the given 🔜time frame, which is mostly commonly set at 36 months.

Calmar Ratio History

The Calmar ratio was developed and introduced in 1991 by Terry W. Young, a California-based fund manager. He argued that the ratio offered a more up-to-date reading of a fund's performance than the Sterling or Sharpe ratios, other commonly used gauges, because it was calculated monthly while they were done annually. The monthly update also made the Calmar ratio smoother than what Young called the "too sensitive" Sterling ratio.

The Calmar ratio is, in fact, a modified version of the Sterling ratio. Its name is an acronym for California 澳洲幸运5官方开奖结果体彩网:Managed Account Reports. Young also referred 🧔to the Calmar ratio as th♌e Drawdown ratio.

The Calmar Ratio's Strengths and Weaknesses

One strength of the Calmar ratio is its use of the 澳洲幸运5官方开奖结果体彩网:maximum drawdown as a meaꦫsure𝔍 of risk. For one thing, it's more understandable t⛦han other, more abstract risk gauges, and this makes it preferable for some investors. In addition, even though it is updated mon☂thly, the Calmar ratio's standard three-year time frame makes it more reliable than other gauges with shorter time frames that might be more affected by natural market volatility.

On the flip side, the Calmar ratio's 澳洲幸运5官方开奖结果体彩网:focus on drawdown means 💯it's view of risk is rather limited compared to other gauges, and it ignores general volatility. Th🌃is makes it less statistically significant and useful.

Still, the risk-adjusted nature of the Calmar ratio makes it among many possible investment performance measures, though it is one of the lesser-known 澳洲幸运5官方开奖结果体彩网:gauges of risk-adjusted returns. In fact, 澳洲幸运5官方开奖结果体彩网:William Sharpe, creator of the Sharpe, won the Nobel Prize in economics in 1990 for his work on capital asset pricing theory.