# Calmar Ratio

*Risk & Portfolio — Finicade finance glossary*

The Calmar ratio divides annualised return by maximum drawdown, judging a strategy by the worst loss investors actually had to sit through. It's popular with managed futures and hedge fund allocators because drawdown, not volatility, is what triggers redemptions. Its weakness is that maximum drawdown is a single historical observation, so the ratio is unstable and improves simply by having been lucky so far.

**Formula:** `Calmar ratio = Annualised return ÷ Maximum drawdown`

**Also known as:** Calmar, drawdown-adjusted return

**Related terms:** [Drawdown](https://finicade.com/glossary/drawdown), [Sharpe Ratio](https://finicade.com/glossary/sharpe-ratio), [Sortino Ratio](https://finicade.com/glossary/sortino-ratio), [Hedge Fund](https://finicade.com/glossary/hedge-fund), [Risk Premium](https://finicade.com/glossary/risk-premium)

Source: https://finicade.com/glossary/calmar-ratio