What Is Calmar Ratio?
The Calmar Ratio, popularized by California Managed Accounts Reports, measures annualized return divided by maximum drawdown. A strategy returning 20% with a 10% max drawdown has a Calmar of 2.0 — for every percent of pain, you got 2% of gain.
Calmar is intuitive in a way Sharpe isn't: it answers 'how much do I make per unit of worst-case loss?' For position-sized portfolios, Calmar above 1.0 is decent; above 2.0 is good; above 3.0 is rare and often indicates either skill or insufficient sample size.
Weakness: Calmar is sensitive to the specific drawdown observed. A strategy that hasn't yet experienced a tail event will show inflated Calmar until it does. Calmar over 5+ years is more reliable than Calmar over 1 year — and even then, future drawdowns may exceed the historical maximum.
Related terms
- Sharpe Ratio — Risk-adjusted return — the excess return per unit of volatility.
- Sortino Ratio — Like Sharpe, but only penalizes downside volatility — better for asymmetric strategies.
- Maximum Drawdown — The largest peak-to-trough decline in account value or strategy returns.
- Drawdown — The peak-to-trough decline in account equity during a losing streak.