# Sortino Ratio Calculator

URL: https://speedycalculator.com/calculators/finance/sortino-ratio/
Last updated: 2026-10-25

> The Sortino ratio calculator measures risk-adjusted return using only downside volatility: excess return over the risk-free rate (or a target) divided by the downside deviation – and compares two assets.

## Inputs

- Risk-free rate (or target return) (%)
- Asset 1 – average return (%)
- Asset 1 – downside deviation (%)
- Asset 2 – average return (%)
- Asset 2 – downside deviation (%)

## Results

- Asset 1 – Sortino ratio
- Asset 2 – Sortino ratio
- Better downside-adjusted return

## Formula

```
Sortino ratio = (average return − risk-free rate) ÷ downside deviation
```

## Explanation

Unlike the Sharpe ratio, the Sortino ratio doesn't penalise upside swings – only returns below the target count as risk. It suits investments with skewed returns, such as options strategies or hedge funds.

### How to use the Sortino Ratio Calculator

- **Risk-free rate (or target return)**
- **Asset 1 – average return**
- **Asset 1 – downside deviation**
- **Asset 2 – average return**
- **Asset 2 – downside deviation**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter the risk-free rate (or target return), and each asset's average return and downside deviation.

### Tips

- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.

### Common mistakes to avoid

- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).

### Inputs explained

FieldWhat to enterRisk-free rate (or target return)In %Asset 1 – average returnIn %Asset 1 – downside deviationIn %Asset 2 – average returnIn %Asset 2 – downside deviationIn %

### What each result means

- **Asset 1 – Sortino ratio** = ([Asset 1 – average return] - [Risk-free rate (or target return)])÷[Asset 1 – downside deviation]
- **Asset 2 – Sortino ratio** = ([Asset 2 – average return] - [Risk-free rate (or target return)])÷[Asset 2 – downside deviation]

### Example values

How the main result changes when **Risk-free rate** changes and everything else stays at the example values above:

Risk-free rate (or target return) (%)Asset 1 – Sortino ratio21.2531.1254150.87560.7580.5

## Worked example

Inputs — Risk-free rate (or target return): 4 %; Asset 1 – average return: 12 %; Asset 1 – downside deviation: 8 %; Asset 2 – average return: 9 %; Asset 2 – downside deviation: 4 %.

Results — **Asset 1 – Sortino ratio = 1**; Asset 2 – Sortino ratio = 1.25; Better downside-adjusted return = Asset 2.

## FAQ

**What is a good Sortino ratio?**
Above 2 is considered good.

**How is it different from the Sharpe ratio?**
It uses downside deviation instead of total standard deviation.

**What is downside deviation?**
The standard deviation of returns below the target.

**What formula does the Sortino Ratio Calculator use?**
Sortino ratio = (average return − risk-free rate) ÷ downside deviation.


## Sources

- [Corporate Finance Institute – financial ratios](https://corporatefinanceinstitute.com/)