Calmar Ratio

What is the 'Calmar Ratio'

The Calmar ratio is a comparison of the average annual compounded rate of return and the maximum drawdown risk of commodity trading advisors and hedge funds. The lower the Calmar Ratio, the worse the investment performed on a risk-adjusted basis over the specified time period; the higher the Calmar Ratio, the better it performed. Generally speaking, the time period used is three years, but this can be higher or lower based on the investment in question.

BREAKING DOWN 'Calmar Ratio'

Developed by Terry W. Young in 1991, the Calmar Ratio is short for California Managed Account Reports. The ratio is very similar to the MAR Ratio, which was formulated much earlier. The only difference is that the MAR Ratio is based on data produced from the inception of the investment, whereas the Calmar Ratio is typically based on more recent and shorter-term data. Regardless of which ratio is used, investors gain better insight as to the risk of various investments.

RELATED TERMS
  1. MAR Ratio

    A measurement of returns adjusted for risk that can be used to ...
  2. Sterling Ratio

    A ratio used mainly in the context of hedge funds. This risk-reward ...
  3. Drawdown

    The peak-to-trough decline during a specific record period of ...
  4. Ratio Analysis

    A ratio analysis is a quantitative analysis of information contained ...
  5. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ...
  6. Accounting Ratio

    A way of expressing the relationship between one accounting result ...
Related Articles
  1. Fundamental Analysis

    What's a Drawdown?

    A drawdown is usually expressed as a percentage change between the peak price and the low price (trough) of an investment.
  2. Investing Basics

    Analyze Investments Quickly With Ratios

    Make informed decisions about your investments with these easy equations.
  3. Trading Strategies

    Financial Ratios to Spot Companies Headed for Bankruptcy

    Obtain information about specific financial ratios investors should monitor to get early warnings about companies potentially headed for bankruptcy.
  4. Fundamental Analysis

    Efficiency Ratio

    There are many types of efficiency ratios, but all measure how well a company utilizes its resources to make a profit. Business managers use these ratios to determine how well they are operating ...
  5. Forex

    The Price To Earnings Ratio Explained

    The price to earnings ratio is one of the most important ratios in investing. Find out how it is calculated, how it can be used and what it tells investors about a particular stock.
  6. Investing

    Ratio Analysis

    Ratio analysis is the use of quantitative analysis of financial information in a company’s financial statements. The analysis is done by comparing line items in a company’s financial ...
  7. Fundamental Analysis

    Dynamic Current Ratio: What It Is And How To Use It

    Learn why this ratio may be a good alternative to the current, cash and quick ratios.
  8. Investing

    PEG Ratio

    Learn more about how this ratio is used to determine a stock's value based on its earnings growth.
  9. Mutual Funds & ETFs

    Pay Attention To Your Fund’s Expense Ratio

    Even small differences in an expense ratio can have a big impact on a portfolio.
  10. Investing Basics

    3 Ways To Evaluate the Performance of Alternatives

    Learn about three ways to measure the performance of alternative investments. See how the commonly used Sharpe ratio has drawbacks in measuring volatility.
RELATED FAQS
  1. How do drawdowns help assess investment risk?

    Learn how the concepts of drawdowns and maximum drawdowns are used in the analysis of risk, as well as in the building of ... Read Answer >>
  2. How do stock dividends affect the retained earnings account?

    Understand the difference between financial ratio analysis and accounting ratio analysis. Learn why ratio analysis is important ... Read Answer >>
  3. What are the advantages and disadvantages of zero-based budgeting in accounting?

    Learn how the information ratio is calculated as a risk-adjusted measure of performance, and understand how it seeks to differentiate ... Read Answer >>
  4. What role does ratio analysis play in valuing a company?

    Learn about the role of ratio analysis in determining company value, including some of the most common ratios used by modern ... Read Answer >>
  5. To what extent should you take a company's liquidity ratio into account before investing ...

    Find out how important it is for an investor to know a company's liquidity ratio before deciding to invest, and why relying ... Read Answer >>
  6. How can a company quickly increase its liquidity ratio?

    Discover what high and low values in the liquidity ratio mean and what steps companies can take to improve liquidity ratios ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center