Sortino Ratio

The Sortino Ratio is a way to measure an investment's performance by comparing its returns to the risk of negative outcomes. It focuses on downside risk—the chance of losing money—rather than overall volatility. A higher Sortino Ratio indicates that the investment earns good returns with less risk of significant losses, making it a useful tool for investors who are primarily concerned with avoiding downside risk. It helps evaluate whether the returns justify the potential for losses, giving a clearer picture of risk-adjusted performance.