NxCalmar - Calculates the Calmar Ratio

Returns the Calmar ratio.

Syntax

NxCalmar($R_p$, $R_f$, Freq)

$R_p$

is the portfolio's rate of returns data series (a one-dimensional array of cells (e.g., rows or columns)).

$R_f$

is the risk-free simple returns data (a single value or a one-dimensional array of cells (e.g., rows or columns)). If missing, a zero(0) risk-free return is assumed.

Freq

is the data sampling frequency per year (i.e., number of data points in one year) (e.g., 12 = monthly, 4 = quarterly, etc.). If missing, a monthly frequency is assumed.

Remarks

1. The Calmar ratio is a function of the fund's average compounded annual rate of return versus its maximum drawdown.
2. The Calmar ratio was developed and introduced in 1991 by Terry W. Young, a California-based fund manager.
3. The Calmar ratio is expressed as follows: $$\textrm{Calmar Ratio} = \frac{R_p-R_f}{\textrm{MDD}}$$ Where:
   • $R_p$ is the return of a given portfolio or strategy.
   • $R_f$ is the risk-free return.
   • $\textrm{MDD}$ is the maximum drawdown (MDD). 
4. The risk-free rate of return is the return of an investment with zero risks, meaning it's the return investors could expect for taking no risk. The risk-free rate could be a US treasury rate or yield, such as a one-month T-Bill, Note, etc.
5. If the risk-free rate of return argument contains one value, it is assumed the value is the risk-free annual rate of return.
6. The Calmar ratio aims to demonstrate the risk required to obtain a return.
7. By definition, all values in the input data set (i.e., X) must be greater than -1.0.
8. The input data series may include missing values (e.g., #N/A, #VALUE!, #NUM!, empty cell) but will not be included in the calculations.

Examples

Example 1:

Related Links

• Wikipedia - Calmar ratio
• Investopedia - Calmar Ratio

References

• Hamilton, J .D.; Time Series Analysis, Princeton University Press (1994), ISBN 0-691-04289-6
• Tsay, Ruey S.; Analysis of Financial Time Series John Wiley & SONS. (2005), ISBN 0-471-690740