Posted in Finance, Accounting and Economics Terms, Total Reads: 281
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.
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: