Calmar Ratio
Annualized return divided by maximum drawdown.
The Calmar ratio compares a portfolio's annualized return to its maximum drawdown, measuring return per unit of drawdown risk. It's popular among hedge funds and CTAs. A Calmar ratio above 1.0 means the annualized return exceeds the worst historical drawdown.
Formula
Related Terms
Maximum Drawdown
The largest peak-to-trough loss before recovery — the worst realized loss.
Sharpe Ratio
Risk-adjusted return: excess return divided by volatility.
Efficient Frontier
The set of portfolios offering the highest return for each level of risk.
Covariance Matrix
Captures how asset returns move together — the foundation of diversification.
Portfolio Volatility
Standard deviation of portfolio returns — total risk including diversification effects.
Minimum Variance Portfolio
The portfolio with the lowest possible volatility.