Forex glossary
Calmar Ratio
The Calmar ratio divides annualized return by the magnitude of maximum drawdown over a stated observation period. Comparisons require matching capital measures, windows and calculation conventions. Zero drawdown makes the ratio undefined; there is no universal good-result threshold.
Illustrative example
How does it work in practice?
In a hypothetical report, annualized return is 12% and maximum drawdown is 8% within the same window. Under the stated convention, Calmar is 12/8 = 1.5; it does not forecast future drawdown.
A case to work through
Same return, different drawdown
Model: two reports share a window and 9% annualized return; maximum drawdowns are 6% and 12%.
- The first ratio is 9/6 = 1.5.
- The second is 9/12 = 0.75; its denominator changes the comparison.
What follows? Match window and capital definitions before comparing ratios.
Example boundary: A higher sample ratio does not guarantee future results.
A useful distinction
Calmar Ratio / Sharpe Ratio
Sharpe uses excess-return volatility; Calmar uses maximum drawdown.
Check your understanding
Compare return-to-drawdown ratios under matching assumptions.
Show the answer and explanation
0.8
8% / 10% = 0.8. Divide annualized return by drawdown over the same window; do not subtract them.
Net results and risk measures
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Read the fuller explanation
Related terms
Sources and documentation
- Empyrical: performance-metric documentation
Calmar calculation documentation; a metric implementation source, not an effectiveness study.
The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.