Sortino Ratio Downside Analysis

The Sortino Ratio improves upon the Sharpe Ratio by only considering downside volatility in the denominator. It penalizes strategies for negative returns while ignoring positive volatility.

This is particularly useful for crypto traders who do not mind upside volatility. By focusing on downside risk, it provides a clearer picture of the risk of loss.

It is an essential metric for strategies that are inherently asymmetric. Understanding this ratio helps traders optimize for survival and long-term compounding.

It is a more accurate measure of risk for most retail and professional investors.