Plain-English definitions, reviewed by an independent investor
Sortino Ratio
The Sortino ratio is like Sharpe but only penalises downside volatility, not upside.
The Sortino ratio is like Sharpe but only penalises downside volatility, not upside.
Sortino = (Return − Risk-Free) ÷ Downside Deviation
Why it matters
It scores risk more sensibly — investors fear drops, not gains.
Common confusion
It needs a target return to define “downside,” a small extra input.
Frequently Asked Questions
Sortino vs Sharpe?
Sortino ignores upward swings, so it can look better for trending funds.
Higher better?
Yes, more return per unit of harmful volatility.