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Sortino Ratio

Quantitative Metrics

The Sortino ratio is a modification of the Sharpe ratio that uses only downside deviation (the standard deviation of negative returns) rather than total volatility.

Unlike Sharpe, the Sortino ratio only penalizes downside volatility — because upside volatility isn't a problem. For earnings-event driven strategies that generate lumpy but mostly positive returns, Sortino is often a more relevant metric than Sharpe.