How to Use the Sortino & Information Ratio Calculator
A high return alone doesn't tell you whether a portfolio was managed well — what matters is how much downside risk was taken to get there, and how consistently it beat its benchmark. Enter your portfolio's return, a target return (MAR), downside deviation, benchmark return, and tracking error, and this calculator computes both the Sortino ratio and the information ratio in one step.
The Sortino ratio divides (portfolio return minus target return) by downside deviation, counting only volatility below your target as risk — unlike the Sharpe ratio, which penalizes all volatility equally. The information ratio divides (portfolio return minus benchmark return) by tracking error, measuring how consistently a manager generates excess return relative to how much that excess return bounces around. Higher values on both indicate better risk-adjusted performance.
Keep in mind both ratios are highly sensitive to the time period and data frequency (monthly vs. annual) used to calculate them, so when comparing funds or strategies, make sure the figures come from the same period and methodology. Avoid reading too much into ratios calculated over a short window, since they can reflect luck as much as skill.
Frequently Asked Questions
The Sharpe ratio treats all volatility, up or down, as risk. The Sortino ratio only penalizes downside volatility below your target return, so strategies with large upside swings tend to score better on Sortino than on Sharpe.
Generally an information ratio above 0.5 is considered good and above 1.0 is considered excellent for active management. But short measurement periods can produce numbers driven by luck, so use a sufficiently long track record.