Calmar Ratio
How much return are you getting for the worst loss you could face?
What is it?
The Calmar Ratio divides a fund's annualised return by its Maximum Drawdown (worst peak-to-trough loss). A high Calmar Ratio means the fund delivers strong returns without exposing investors to catastrophic losses.
Unlike the Sharpe Ratio, which uses standard deviation as the risk measure, the Calmar Ratio focuses specifically on the worst-case scenario. It asks: how much return are you earning per unit of your worst possible loss?
For long-term investors, the Calmar Ratio is particularly meaningful because a severe drawdown can force people to exit at the bottom, permanently locking in losses. A fund with a high Calmar Ratio rewards patience by avoiding the worst crashes.
Formula
Calmar Ratio = Annualised Return ÷ |Max Drawdown|Annualised ReturnCompound Annual Growth Rate (CAGR) of the fund|Max Drawdown|Absolute value of the maximum peak-to-trough declineReal Example
Comparing two funds with different return and drawdown profiles.
Given
Calculation
Fund A Calmar = 14 ÷ 20 = 0.70 Fund B Calmar = 16 ÷ 40 = 0.40
What this means
Fund B has higher returns, but Fund A has a far better Calmar Ratio (0.70 vs 0.40). Fund A delivers more return per unit of crash risk — a better deal for most investors.
Good vs Bad Benchmarks
Above 1.5
Exceptional balance of returns and crash protection
0.75 – 1.5
Good balance — solid returns without massive crashes
0.4 – 0.75
Acceptable for long-term investors with high risk tolerance
Below 0.4
Returns do not justify the crash risk — approach with caution
Check this ratio for a real fund
MFLens shows Calmar Ratio across 1Y / 3Y / 5Y / 7Y / 10Y rolling windows for every Indian mutual fund.
Rolling metrics on MFLens show how each ratio evolves across all historical windows of the selected period. This provides consistency insights beyond traditional trailing calculations. For informational purposes only — not financial advice.