Calmar Ratio

Return Metrics
Updated Apr 2026 • Has calculator

Compares a fund's annualised growth rate to its worst drawdown — a risk-adjusted return metric for drawdown-sensitive investors.

What is Calmar Ratio?

The Calmar ratio (Compound Annualised Growth Rate divided by Maximum Drawdown) was developed by Terry Young in 1991 to evaluate Commodity Trading Advisors (CTAs) and hedge funds, where drawdown risk is a primary concern. A higher Calmar ratio means the fund earns more annual return for each unit of worst-case drawdown risk. It is conventionally computed over a 36-month trailing period. Because it uses maximum drawdown rather than standard deviation, the Calmar ratio is more sensitive to extreme loss events than the Sharpe or Sortino ratios. Funds with a Calmar ratio above 0.5 are considered reasonable; above 1.0 is strong. The ratio's main limitation is that historical drawdowns may understate future worst-case losses.

Formula

Calmar = CAGR / |Maximum Drawdown|

Worked Example

Worked example — S&P 500 Index (SPX)

36-Month Period 2021–2023

Step 1  S&P 500 CAGR (Jan 2021 – Dec 2023): 9.45%
Step 2  Maximum Drawdown over the period: −25.4% (Jan–Oct 2022)
Step 3  Calmar = 9.45% / |−25.4%| = 9.45% / 25.4%
Step 4  Calmar = 0.37 — below 0.5; the 2022 bear market weighed on the metric

Source: S&P Dow Jones Indices — S&P 500 Historical Data (2024-01-31)

Calculate Calmar Ratio

Compound annual growth rate over the measurement period (3 years typical)

Largest peak-to-trough decline (enter as negative, e.g. −18)

Calmar Ratio

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Not investment advice.

How to Interpret Calmar Ratio

< 0.25
Poor — return barely compensates for drawdown risk
0.25 – 0.5
Acceptable — modest return per unit of drawdown
0.5 – 1
Good — solid return relative to worst-case drawdown
> 1
Excellent — CAGR exceeds maximum drawdown in magnitude

📚 Advanced Risk — Complete the path

  1. Value at Risk
  2. Max Drawdown
  3. Calmar Ratio
  4. Capture Ratios
  5. Kelly Criterion
Sources
  1. Young, T.W. — Calmar Ratio: A Smoother Tool, Futures, 1991
  2. S&P Dow Jones Indices — S&P 500
  3. Investopedia — Calmar Ratio