Calmar Ratio

A measure of risk in a hedge fund, calculated by dividing the annual compounded return by the maximum drawdown using its absolute value.

A fund with a higher Calmar ratio is generally preferring over one with a lower Calmar ratio.  However, past performance is not indicative of future results and a fund that has done well in a bull market may not do so well in a bear market.  Just think, Long Term Capital Management, which imploded in less than a year after a few years of stellar returns.

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