Sortino ratio explained

The Sortino ratio is a refinement of the Sharpe ratio. Both measure return per unit of risk — but Sortino counts only downside volatility (the falls), not the upside.

Why that matters

Sharpe penalises a fund for any swing, even big gains. But investors don't mind upside surprises — they only fear losses. Sortino measures return against "bad" volatility only, so it rewards funds that fall less while still rising well.

How to read it

• Higher is better — more return per unit of downside risk.
• Especially useful for funds with uneven, asymmetric returns.
• Like Sharpe, compare it within the same category.

If a fund's Sortino is much higher than its Sharpe, most of its volatility is to the upside — a good sign.

→ Compare Sharpe and Sortino side by side under "Risk Analysis" on a fund page.