Sortino Ratio

The Sortino Ratio is an extension of Sharpe Ratio and measures excess return (i.e. return of the portfolio minus minimum target return, which is usually the risk-free rate) per unit of downside risk. Downside risk considers the annualised standard deviation of negative logged monthly returns, while positive returns are set to zero.

Where:
Rp = Return of the portfolio
RT = Minimum acceptable target return
σD = Downside risk

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