What it measures
The Calmar ratio divides a strategy's annual growth rate by its largest peak-to-trough loss. It answers: how much did I earn each year for the worst pain I had to sit through?
Calmar = CAGR / maximum drawdown (both as positive percentages)
Example
A strategy grew 15% a year with a worst drawdown of 30%: 15 / 30 = 0.5. A buy-and-hold S&P 500 investor since 2000 has a Calmar near 0.15, because of the 55% fall in 2008 and 2009.
Rough guide
| Calmar | Reading |
|---|---|
| Below 0.2 | Deep losses for the return |
| 0.2 to 0.5 | Typical of stock portfolios |
| 0.5 to 1 | Strong |
| Above 1 | Excellent, or a short or overfit backtest |
Limits
It rests on a single worst event, so a longer test almost always lowers it. Compare Calmar ratios only over the same period. The traditional definition uses the last 36 months; many tools, including backtests here, use the full period.
See also
- Maximum drawdown What maximum drawdown is, how to calculate it, why losses need bigger gains to recover, and historical drawdowns for stocks and leveraged funds.
- CAGR (compound annual growth rate) What CAGR means, the formula for compound annual growth rate, a worked example, and why it differs from the average annual return.
- Sharpe ratio What the Sharpe ratio measures, how to calculate it from returns and volatility, what counts as a good Sharpe ratio, and where it misleads.
Pages that link here: How to read a backtest
Last updated September 30, 2026. Education only, not investment advice.