Calculator Inputs
Example data table
Use this sample monthly series to test the calculator quickly.
| Month | Return % | Target % | Below Target? |
|---|---|---|---|
| Jan | 1.80% | 0.50% | No |
| Feb | -0.90% | 0.50% | Yes |
| Mar | 2.40% | 0.50% | No |
| Apr | -1.70% | 0.50% | Yes |
| May | 0.60% | 0.50% | No |
| Jun | -2.10% | 0.50% | Yes |
| Jul | 1.20% | 0.50% | No |
| Aug | 0.40% | 0.50% | Yes |
| Sep | -0.50% | 0.50% | Yes |
| Oct | 2.00% | 0.50% | No |
| Nov | -1.10% | 0.50% | Yes |
| Dec | 1.50% | 0.50% | No |
Formula used
1) Period shortfall: shortfall_i = min(0, r_i - MAR)
2) Semivariance: Semivariance = Σ(shortfall_i²) / divisor
3) Downside deviation: DD = √Semivariance
4) Annualized downside deviation: Annual DD = DD × √periods_per_year
5) Shortfall probability: Downside count / total observations
6) Sortino ratio: ((average return - MAR) × periods_per_year) / Annual DD
You can divide by all observations or only downside observations, depending on your reporting convention.
How to use this calculator
- Paste your historical returns into the return series box.
- Select whether the values are percentages or decimals.
- Enter the minimum acceptable return and choose period or annual basis.
- Set periods per year, such as 12 for monthly or 252 for daily data.
- Choose a divisor method, then add portfolio value for money-based risk translation.
- Press calculate to see summary cards, the chart, and the detailed shortfall table.
- Download CSV for spreadsheet review or PDF for reporting packs.
FAQs
1) What does downside risk measure?
It measures only harmful volatility. The calculator focuses on returns below your chosen target, so strong upside periods do not inflate the downside statistic.
2) How is downside deviation different from standard deviation?
Standard deviation treats upside and downside moves equally. Downside deviation ignores favorable returns and measures only misses below the minimum acceptable return.
3) What target return should I use?
Use a target that matches your policy. Common choices include zero, the risk-free rate, an inflation hurdle, or a required portfolio objective.
4) Should I enter annual or periodic targets?
Enter whichever target you already use. The calculator converts annual targets into periodic equivalents when needed, keeping the shortfall comparison consistent.
5) Which divisor is better: total or downside observations?
Using total observations is common in downside deviation reporting. Using only downside observations isolates the severity of bad periods. Choose the convention your team prefers.
6) What does the Sortino ratio tell me?
It shows annualized excess return earned per unit of annualized downside deviation. Higher values usually indicate more efficient downside risk-taking.
7) Can I use daily, weekly, or monthly data?
Yes. Just keep the return frequency and periods-per-year setting aligned. For example, use 252 for daily data and 12 for monthly data.
8) Why download CSV or PDF reports?
CSV helps with audit trails and further analysis. PDF is useful for investment memos, client reviews, and committee reporting.