Definition
The Calmar ratio evaluates performance relative to the worst possible loss experience. Higher ratios indicate better return per unit of maximum drawdown pain. A Calmar above 1.0 means annualized return exceeds the worst drawdown. It is particularly useful for evaluating hedge funds, managed futures, and strategies where drawdown management is critical.
functions Formula
Calmar Ratio = Annualized Return / |Maximum Drawdown|
lightbulb Example
Fund A returns 12% annually with 20% max drawdown: Calmar = 0.60. Fund B returns 8% with 10% max drawdown: Calmar = 0.80. Fund B delivers better risk-adjusted returns despite lower absolute returns.
verified_user Key Points
- Measures return relative to worst-case loss
- Higher is better
- Calmar > 1.0 means return exceeds worst drawdown
- Most relevant over 3+ year periods