Sortino Ratio Calculator

WHAT IT DOES This tool calculates downside-focused risk-adjusted performance metrics for your DeFi positions, with the Sortino ratio as the primary measure. Unlike the Sharpe ratio, which penalizes both upside and downside volatility, the Sortino ratio focuses exclusively on downside deviation—the volatility of negative returns. This makes it particularly useful for evaluating investments where investors are primarily concerned about downside risk. The tool reads your wallet balances and positions (optional) and combines them with user-defined parameters—expected annual return, risk-free rate, and time period—to compute the Sortino ratio, downside deviation, total volatility, Sharpe ratio for comparison, and a performance rating (Excellent, Very Good, Good, Moderate, Below Risk-Free, or Poor). HOW TO USE Connect your EVM wallet using the "Connect" button, or manually enter any wallet address (optional). Select your asset (ETH, WBTC, USDC, DAI, or LINK). Enter your expected annual return (%), risk-free rate (%, default 3%), and time period in years. Select your network and click "Calculate Sortino ratio" to run the analysis. The tool will display your total volatility, downside deviation, excess return, Sortino ratio, annualized Sortino, Sharpe ratio for comparison, and a performance rating. A Sortino ratio above 1.2 is considered good, above 2.0 is excellent, and below 0 indicates negative downside risk-adjusted returns. The Sortino ratio is especially valuable for assets with skewed return distributions where downside risk is the primary concern. TECHNICAL MECHANISM The Sortino ratio follows the formula: S = (R_p - R_f) / σ_d, where R_p is the expected return, R_f is the risk-free rate, and σ_d is the downside deviation (standard deviation of negative returns only). Downside deviation is modeled as 0.65–0.75 of total volatility, reflecting that downside risk is typically lower than total volatility for assets with positive skew or asymmetric return distributions. Total volatility is based on asset class (ETH ~55%, WBTC ~45%, LINK ~65%, stablecoins ~8%) and scaled by √timePeriod. The tool also calculates the Sharpe ratio for comparison using total volatility. Performance ratings are assigned based on Sortino ratio thresholds: Excellent (>2.5), Very Good (>1.8), Good (>1.2), Moderate (>0.6), Below Risk-Free (>0), and Poor (