Calmar Ratio

Posted in Finance, Accounting and Economics Terms, Total Reads: 246

Definition: Calmar Ratio

Also called as the Drawdown Ratio, it is short for California Managed Account Reports. It was developed by Terry W Young in 1991. It is an important statistic to measure return vis a vis drawdown risk for an investor.


It is given by:

Fund’s Compounded Annualized Rate of Return / Fund’s Maximum Drawdown

Hence, Calmar ratio is a measure of risk adjusted performance of a trader (similar to Sharpe’s ratio which is a measure of risk adjusted performance of a portfolio).

Higher the Calmar ratio, better is the performance of the trader.

It is usually calculated over a 3 year timeframe. Drawdown of a fund refers to the fund’s decline (in percentage) in its highest NAV to lowest NAV. Hence, Calmar ratio calculates the performance taking into account, the drawdown of a fund.

The Calmar ratio is a definite number and following conclusions can be drawn from it:

Value greater than 5: Excellent

Value between 2 and 5: Very good

Value between 1 and 2: Good



Looking for Similar Definitions & Concepts, Search Business Concepts

Similar Definitions from same Category: