Sortino Ratio

Sortino Ratio Definition

Sortino Ratio: The sortino ratio that is used to measure the return of a certain hedge fund portfolio or a specific asset after becoming adjusted for risk. Basically, Sortino Ratio is a revised version of Sharpe’s Ratio because it only negatively affects the returns that fall below a required rate of return of the portfolio or specific asset being measured. (Sharpe’s ratio positively and negatively affects returns)

Sortino Ratio Formula = R – T / D

R = Return on asset or portfolio

T = Required Rate of Return

D = Downside Risk

Here is the bio of Frank Sortino.

Read dozens of additional articles like this within the guide to Hedge Fund Terms.

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