Sharpe vs Sortino
Sharpe ratio uses standard deviation of all returns; Sortino uses downside deviation only. The Sortino-minus-Sharpe gap quantifies how skewed the return distribution is. Symmetric returns produce a small gap; positively skewed strategies produce a large one; negatively skewed (option-selling, mean-reversion) strategies produce a near-zero or negative gap.
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Definition
Sharpe vs Sortino
Sharpe ratio uses standard deviation of all returns; Sortino uses downside deviation only. The Sortino-minus-Sharpe gap quantifies how skewed the return distribution is. Symmetric returns produce a small gap; positively skewed strategies produce a large one; negatively skewed (option-selling, mean-reversion) strategies produce a near-zero or negative gap.
Why it matters
Comparing strategies on Sharpe alone systematically disadvantages long-volatility, momentum, and options-buying systems — the ones with the upside surprises that the metric punishes. Comparing on Sortino alone hides tail risk. The pair of numbers tells you what the single number can't.
How it works
Compute both ratios on the same sample with the same target return. Look at their ratio: Sortino / Sharpe ≈ σ / σ_d. Above 1.5 means the strategy has meaningful positive skew; below 1.0 means it's negatively skewed and the Sortino is flattering it.
Example
Three strategies, same 12% annualized return, 18% volatility
Long vol — Sortino / Sharpe
1.8
Trend follower — Sortino / Sharpe
1.4
Vol seller — Sortino / Sharpe
0.85
Same headline numbers. The vol seller is hiding negative skew that Sortino flatters; on Sharpe it would still look mediocre. The long-vol strategy is the inverse: Sharpe undersells it.
Key Takeaways
The Sortino / Sharpe ratio is a fast skew check.
Sortino / Sharpe < 1 is a negative-skew warning, not just a noise variation.
Always report both — they describe different sides of the return distribution.
Related Terms
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Sharpe vs Sortino Calculator
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Returns Distribution Analyzer
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Risk-Adjusted Returns Calculator
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FAQ
Questions people ask next
The short answers readers usually want after the first pass.
Sources & References
- Performance Measurement in a Downside Risk Framework — Sortino, Price (1994), Journal of Investing 3(3)
Related Content
Keep the topic connected
Sharpe Ratio
Sharpe ratio defined, when it lies (skew, fat tails, autocorrelation), and how to read a Sharpe number you didn't compute yourself.
Sortino Ratio
Sortino ratio: same numerator as Sharpe, denominator only counts downside volatility. When it's the right number to look at.