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Finance Dictionary and Glossary of Investment Terms
A variation of the Sharpe ratio which differentiates harmful volatility from volatility in general using a value for downside deviation. The Sortino ratio is the excess return over risk-free rate over the downside semi-variance, so it measures the return to "bad" volatility. This ratio allows investors to assess risk in a better manner than simply looking at excess returns to total volatility, since such a measure does not consider how often the price of the security rises as opposed to how often it falls.
Similar to the "Sharpe Ratio," except it uses downside deviation for the denominator, whereas Sharpe uses standard deviation.