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开奖号码历史查询:rate of return versus its maximum drawdown. The higher the Calmar ratio, the better it performed on a 澳洲幸运5开奖号码历史查询:risk-adjusted basis during the g♕iven time frame, which is mostly commonly sᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚet 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开奖号码历史查询:Managed Account Reports. Young also referred to the Calmar ratio 🗹as the 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开奖号码历史查询:ma﷽xim𒊎um drawdown as a measure of risk. For one thing, it's more understandable than other, more abstract risk gauges, and thiﷺs makes it preferable for some investors. In addition, even though it is updated monthly, 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开奖号码历史查询:focus on drawdown means it's view of risk💯 is rather limited compared to oth🎀er gauges, and it ignores general volatility. This 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开奖号码历史查询:gauges of risk-adjusted returns. In fact, 澳洲幸运5开奖号码历史查询:William Sharpe, creator of the Sharpe, won the Nobel Prize in economics in 1990 for his work on capital asset pricing theory.