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Calmar ratio

Annualized return divided by absolute maximum drawdown. Pain-adjusted return.

The Calmar ratio, introduced by Terry Young in 1991, divides the annualized compound return of a strategy by the absolute value of its maximum drawdown over a defined period (often the trailing 36 months). It says: for every percentage point of worst-case pain you suffered, how much annual return did you collect?

Calmar is direct, intuitive, and brutal: it puts the worst single moment of the strategy in the denominator. A strategy with 20% CAGR and 10% MaxDD has a Calmar of 2.0, considered excellent. Below 1.0 is generally regarded as marginal.

Because MaxDD depends heavily on the sample period and a single outlier event, Calmar is volatile across windows. It is most useful comparing strategies over the same period rather than as an absolute metric.

Formel

Calmar = CAGR / |MaxDD|

Beispiel

CAGR = 24%, MaxDD = 12%. Calmar = 24 / 12 = 2.0 — strong by industry standards.

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