CALMAR Ratio

It’s an investment metric used by advisors and consumers to compare the “risk-adjusted return” of various investments. 

It is a function of the expected annual rate of return and the maximum drawdown over a selected period of time.

A high ratio implies that it has higher returns on a risk-adjusted basis over the specified timeframe.

FYI, many advisors are familiar with MAR. MAR is the same as CALMAR except it always looks back over the maximum period of time to determine the ratio.  CALMAR can be used to look back over any time frame that you set as parameters. 

A CALMAR over 1.00 is good, over 1.5 is really good, under 1.0 is not awful, and under 0.5-0.7 means you should probably look to find a better investment. 

Examples of our POM-WM models vs. Benchmarks

What you’ll notice from the chart below is that the POM-WM multi-manager portfolios all have a CALMAR above 1.00 and three are above 1.50. (data from January 2016 to December 2021).

Do you know the CALMAR ratio of the portfolios you are recommending to clients?

If not, you can find out by using OnPointe Risk Analyzer. It allows you to create CALMAR metrics for any time-frame as well as many other risk metrics like it’s trademarked Cycle-Based Upside/Downside Capture metric.