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Finance Dictionary and Glossary of Investment Terms
Sortino ratio
Definition 1.
A variation of the Sharpe ratio which differentiates harmful volatility from volatility in general using a value for downside deviation. The Sortino ratio is the excess return over risk-free rate over the downside semi-variance, so it measures the return to "bad" volatility. This ratio allows investors to assess risk in a better manner than simply looking at excess returns to total volatility, since such a measure does not consider how often the price of the security rises as opposed to how often it falls.
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Definition 2.
Similar to the "Sharpe Ratio," except it uses downside deviation for the denominator, whereas Sharpe uses standard deviation.
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