Calmar & Sterling Ratios

The Calmar and Sterling ratios provide additional comparative information for a risk-adjusted assessment of drawdown analysis.

  • Calmar Ratio: The Calmar ratio is the annualized return for the last 3 years divided by the maximum drawdown during these years.
Calmar Ratio
  • Sterling Ratio: The Sterling ratio is the annualized return for the last 3 years divided by the average of the maximum drawdown (in absolute terms) in each of the preceding 3 years, less an arbitrary 10%. An extra 10% is subtracted from the drawdown as one assumes that all maximum drawdowns will be exceeded.
Sterling Ratio

Investors who are required to select and monitor investment managers should develop a basic understanding of investment statistics. Quantitative tools can provide you with good insight that you can use in your qualitative interviews with managers and when monitoring your investments.