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Annual return per unit of worst pain. The trend-follower's favorite.
Calmar ratio is annualized return divided by the absolute value of maximum drawdown. A Calmar of 1.0 means the portfolio gained as much per year on average as its worst peak-to-trough fall. Popular with trend-followers and CTAs because drawdown captures path risk that volatility alone misses.
Calmar = Annual Return / |Max Drawdown|Calmar = Rannual / |MaxDD|You compare your annual reward to the worst single hole you climbed out of. A Calmar above 1.0 means each year of expected return justifies the worst drawdown you have ever taken.
Calmar punishes strategies with one big crash. A portfolio that returns 12% per year with a single 60% drawdown has Calmar of 0.20 — barely a fifth of a year of return per unit of pain. The same return with a maximum 20% drawdown has Calmar of 0.60 — vastly preferable for a leveraged or pension-style investor.
For investors with hard liquidity constraints (margin, retirement spending), Calmar is more honest than Sharpe. Sharpe was happy because volatility was low. Calmar is honest about the worst night you actually had to sleep through.
Your portfolio returned 14% annualized over 5 years. Maximum drawdown over that period was −22%.
Calmar = 14% / 22% = 0.64
That is a healthy reading — you earn nearly two-thirds of your worst-ever drawdown back every year, on average. Generally trend-following CTAs target a Calmar above 0.5 long-term.
Calmar by typical strategy profile:
| Calmar | Verdict |
|---|---|
| < 0.3 | Pain-heavy. Most likely concentrated equities through a crash. |
| 0.3 – 0.5 | Typical for buy-and-hold equities long-run. |
| 0.5 – 1.0 | Solid trend-following / risk-managed equity. |
| 1.0 – 2.0 | Exceptional risk management. |
| > 2.0 | Rarely sustained over multiple market cycles. |
Sterling Ratio · Maximum Drawdown · Sharpe Ratio · Recovery Factor
Traditionally the trailing 36 months. Foliolytic computes it over the user-selected window, defaulting to 3 years or full available history if shorter.
Calmar uses the single worst drawdown. Sterling uses the average of the worst N drawdowns. Sterling is more punishing for strategies with multiple medium drawdowns.
Because their style produces non-normal returns with occasional sharp drawdowns that volatility ratios under-penalize. Calmar puts those tails front-and-center.
Anything below 0.2 over a multi-year window is a strategy with too much path risk for the return it produces.
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