Calmar Ratio
Annualised return divided by the maximum drawdown over the same period.
Formula
Calmar Ratio = Compound Annual Growth Rate / Maximum Drawdown
Unit
ratio (x, times)
In depth
The Calmar ratio measures return against the worst experience rather than against average variability, which makes it closer to how investors actually judge a strategy — the question is not how much it wobbled but how much it hurt. It is conventionally computed over three years, and a longer window that includes a genuine crisis produces a much lower and more honest figure. Because maximum drawdown depends entirely on the period examined, the ratio is highly sensitive to the start and end dates chosen. It complements the Sharpe ratio rather than replacing it, since the two measure different aspects of the same record.
Worked example
A strategy compounding at 18% with a 30% maximum drawdown has a Calmar ratio of 18 / 30 = 0.6. A steadier strategy compounding at 12% with a 12% drawdown scores 1.0 — less return, and considerably easier to hold.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Calmar Ratio” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.