What Is Calmar Ratio?
The Calmar ratio measures annualized return divided by maximum drawdown, giving return per unit of worst-case loss.
Quick Answer
The Calmar ratio measures annualized return divided by maximum drawdown, giving return per unit of worst-case loss.
What Does Calmar Ratio Measure?
The Calmar ratio (named after California Managed Accounts Report) is annualized return over the absolute value of maximum drawdown. It answers: how much return do I get for each unit of max drawdown? It is especially useful for strategies where drawdown is the main concern, such as managed futures or trend following. A higher Calmar ratio indicates better return relative to historical worst loss.
Calmar Ratio = Annualized Return / |Max Drawdown|Typical range: 0.5–2.0+; strategy- and period-dependent
How to Interpret Calmar Ratio
- 1Calmar > 1 suggests return exceeds max drawdown on an annualized basis
- 2Use same lookback period when comparing Calmar across strategies
- 3Sensitive to the specific period (single large drawdown can dominate)
- 4Often computed over 36 months; clarify period when reporting
How to Use Calmar Ratio in Backtesting & Portfolio Analysis
Common Mistakes to Avoid
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