Calmar Ratio

Posted in Finance, Accounting and Economics Terms, Total Reads: 478
Advertisements

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

 

Hence, this concludes the definition of Calmar Ratio along with its overview.

Advertisements

Browse the definition and meaning of more terms similar to Calmar Ratio. The Management Dictionary covers over 7000 business concepts from 6 categories.

Search & Explore : Management Dictionary



Share this Page on: