CalmarRatio: calculate a Calmar or Sterling reward/risk ratio
Description
Calmar and Sterling Ratios are yet another method of
creating a risk-adjusted measure for ranking investments
similar to the SharpeRatio.
Usage
CalmarRatio(R, scale = NA)
SterlingRatio(R, scale = NA, excess = 0.1)
Arguments
R
an xts, vector, matrix, data frame, timeSeries
or zoo object of asset returns
scale
number of periods in a year (daily scale =
252, monthly scale = 12, quarterly scale = 4)
excess
for Sterling Ratio, excess amount to add to
the max drawdown, traditionally and default .1 (10%)
Details
Both the Calmar and the Sterling ratio are the ratio of
annualized return over the absolute value of the maximum
drawdown of an investment. The Sterling ratio adds an
excess risk measure to the maximum drawdown,
traditionally and defaulting to 10%.
It is also traditional to use a three year return series
for these calculations, although the functions included
here make no effort to determine the length of your
series. If you want to use a subset of your series,
you'll need to truncate or subset the input data to the
desired length.
Many other measures have been proposed to do similar
reward to risk ranking. It is the opinion of this author
that newer measures such as Sortino's
UpsidePotentialRatio or Favre's modified
SharpeRatio are both better
measures, and should be preferred to the Calmar or
Sterling Ratio.
References
Bacon, Carl. Practical Portfolio Performance
Measurement and Attribution. Wiley. 2004.