Calmar Ratio Calculator
Weighing Return Against the Worst Stretch You'd Have Lived Through
Average returns hide the experience of actually holding an investment through its roughest period. The Calmar ratio addresses that directly by comparing annualized return to maximum drawdown — the largest peak-to-trough decline the strategy has produced. It answers a very practical question: for every percentage point of worst-case pain, how much annual return did the strategy deliver?
The Formula
The drawdown is used as an absolute value, since it's always reported as a negative decline; the ratio itself is always expressed as a positive number when the strategy has a positive annualized return.
Where This Matters
- Hedge fund and CTA due diligence — the Calmar ratio is a standard reporting metric for managed futures and trend-following strategies, where large drawdowns are common and closely scrutinized.
- Comparing strategies with similar returns — two strategies posting the same annualized return can have very different Calmar ratios if one suffered a much deeper drawdown along the way.
- Setting realistic expectations — a low Calmar ratio is a signal that a strategy's headline return came at the cost of a decline most investors would struggle to sit through.
| Input | Value |
|---|---|
| Annualized return | 15% |
| Maximum drawdown | -20% |
| Calmar Ratio | 0.75 |
15% ÷ 20% = 0.75. Calmar ratios above 1.0 are generally viewed as strong; the ratio is typically calculated over a trailing 36-month window in professional reporting.
How to Use This Calculator
- Enter the strategy's annualized return as a percentage.
- Enter the maximum drawdown as a percentage (entered as negative or positive — the calculator uses its magnitude).
- Select Calculate to get the Calmar ratio.
Related Calculations
See the MAR Ratio Calculator for a near-identical measure built on CAGR, or the Sterling Ratio Calculator for a variant that adjusts the drawdown figure before dividing.