Glossary

The Sortino ratio is a financial metric used to measure the risk-adjusted performance of an investment or portfolio. 📈

It is similar to the Sharpe ratio but focuses specifically on downside risk, which is the risk of negative returns. The Sortino ratio compares an investment's excess return (return above a risk-free rate) to its downside deviation, which only considers the volatility of negative returns.

Example: If two investment portfolios have similar returns, the one with a higher Sortino ratio has a better risk-adjusted performance, as it has experienced fewer and/or less severe negative returns.

Fun fact: The Sortino ratio is named after its creator, Frank A. Sortino, who introduced the concept in the 1980s as a better way to account for downside risk in investment analysis. 🧪