Definition in one sentence: the Calmar ratio divides a strategy's annualised return by its maximum drawdown — it measures how much the strategy returns relative to the worst trough it actually endured.
The formula, and what it measures
The Calmar brings two figures together: annualised return and the maximum drawdown over a 3-year window, by convention.
annualised return ÷ maximum drawdownA Calmar of 2 means that for each point of maximum drawdown endured, the strategy generated 2 points of annualised return. It is a more honest question than the Sharpe's: it integrates what actually happened in the worst moments, not just average noise.
How to read it: good vs bad
| Calmar ratio | Common reading |
|---|---|
| < 1 | Return does not compensate the drawdown risk |
| 1 to 3 | Decent to good |
| > 3 | Very good — check over a long window |
The trap: on a young strategy, the Calmar can look excellent simply because the window has not yet seen a real bear market. Hence the value of always stating the period.
The classic mistake
Confusing the Calmar with the MAR ratio. Both divide an annualised return by the maximum drawdown, but over different windows: the Calmar over a rolling 3 years, the MAR over the strategy's whole life since launch. On a recent strategy, the MAR can be artificially favourable. Always state the window used before comparing two ratios.
At Sextant
Sextant is a transparent quant platform: the Calmar is highlighted precisely because it captures real pain, not abstract statistics. The public logbook shows a rolling Calmar alongside the maximum drawdown and the recovery time. The methodology states the exact window used for the calculation.
Frequently asked questions
What is the difference between Calmar and MAR?
Both divide an annualised return by the maximum drawdown, but over different windows. The Calmar uses a rolling 3-year window by convention; the MAR uses the whole period since the strategy launched. On a young strategy, the MAR can look artificially favourable.
What is a good Calmar ratio?
A Calmar between 1 and 3 is generally considered decent to good, above 3 very good. But on a recent strategy, a high Calmar may simply reflect a window too short to have seen a real bear market.
Why prefer the Calmar to the Sharpe?
The Calmar integrates the worst loss actually endured, where the Sharpe measures only average noise. For an investor who must hold a strategy over time, the question 'what is the worst trough?' is often more useful than 'what is the volatility?'. The two remain complementary.