# Calmar Ratio

Learn more about Calmar Ratio

The Calmar ratio is a measure of the performance of a trading/investment strategy that takes into account the risk of loss. It is calculated by taking the ratio between the average annual return of the strategy over a given period and the maximum drawdown over the same period. Drawdown refers to the maximum decline of the strategy relative to its historical peak. The Calmar ratio is therefore a measure of the relationship between potential return and risk of loss.

The Calmar ratio is considered an indicator of a trading/investment strategy's ability to generate high returns while minimizing losses. A Calmar ratio greater than 1 is considered good, indicating that the strategy generated returns greater than its maximum drawdown. A Calmar ratio less than 1 indicates that the strategy suffered significant losses relative to its returns.

*rp* = return on assets/strategy

**r***rf* = risk-free rate return

More info: *Investopedia*

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