From the course: Excel for Investment Professionals

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Computing Sortino ratios

Computing Sortino ratios - Microsoft Excel Tutorial

From the course: Excel for Investment Professionals

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Computing Sortino ratios

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- [Instructor] Another common metric you may wish to calculate when analyzing your portfolio is the Sortino Ratio. The Sortino Ratio is really a ratio developed by industry to allow us to examine whether a portfolio is beating some sort of minimum threshold that's needed by the investor in question. I'm in the zero five zero six begin Excel file. Now the formula for the Sortino ratio is simply the return on the portfolio minus the MAR, or Minimum Accepted Return divided by our downside standard deviation. Now, the minimum accepted return, or MAR simply is the level of returns that that particular investor needs to get on a regular basis under their investment objectives. So as we've set it up here, I've got the return on the portfolio in column B the MAR in column C, and I'm using a 1% per month MAR, and then our risk free rate in column D, and our holding period return in column E. So to start with, in order to calculate my Sortino ratio, I'm going to create a new column, which will…

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