The Calmar Ratio is the annualised return divided by the Maximum Drawdown — it measures how much return an investor earns per unit of the worst crash they would have experienced.
Calmar Ratio = Annualised Return (typically 3-year CAGR) ÷ Maximum Drawdown (as an absolute value). A fund returning 15% annually with a maximum drawdown of 30% has a Calmar Ratio of 0.5. A fund returning 12% with a maximum drawdown of 15% has a Calmar Ratio of 0.8 — superior risk-adjusted performance. The Calmar Ratio is especially relevant for evaluating absolute return funds, multi-asset funds, and strategies where downside protection is a core objective.
The Calmar Ratio asks: 'For every 1% of the worst crash you suffered, how much annual return did you get?' A Calmar Ratio of 1.0 means: for a 30% maximum drawdown, you got 30% annual returns — a fair trade. A Calmar Ratio of 0.3 means: for a 30% drawdown, you only got 9% annual returns — a poor trade. Higher Calmar = better return per unit of maximum pain.
Calmar Ratio = 3-year CAGR ÷ |Maximum Drawdown over 3 years|.
Higher is better — more return per unit of maximum loss.
Commonly used for hedge funds and absolute return strategies.
Useful for comparing funds with similar returns but different drawdown profiles.
Calmar = Annualised Return ÷ |Maximum Drawdown|