Mutual Fund Sortino Ratio is calculated by making modifications to Mutual Fund Sharpe Ratio. It uses downside volatility effect on Mutual Fund returns.

 


Meaning of Sortino Ratio

Sortino Ratio is a statistical formula or ratio which is used to measure a Mutual Funds capability to generate returns after taking in account volatility. Volatility is of two types, upside volatility and downside volatility. Unlike Sharpe Ratio, Sortino Ratio does not punish a Mutual Fund for upside volatility. In short, we can say that higher the Sortino Ratio, better for Mutual Fund.

 

Use of Sortino Ratio for investor

An investor can use Sortino Ratio is a statistical formula or ratio which is used to measure a Mutual Funds capability to generate returns after taking in account volatility to compare Mutual Funds for evaluation and selection. Care should be taken that it should be used along with Mutual Fund Sharpe Ratio.