---
title: "Sortino Ratio | Altss Glossary"
description: "Sortino Ratio measures risk-adjusted return using downside volatility rather than total volatility."
canonical: "https://altss.com/glossary/sortino-ratio"
---

Fund Economics

# Sortino Ratio

Publisher: Altss LLCPublished 2026-01-12Content modified 2026-01-18

Sortino Ratio measures risk-adjusted return using downside volatility rather than total volatility.

**Allocator relevance:** Medium–High — better aligns with allocator intuition when upside volatility isn’t considered harmful.

**Expanded Definition**
Unlike Sharpe (which uses total volatility), Sortino isolates downside deviation below a minimum acceptable return threshold. This is useful for strategies with asymmetric return profiles where upside variability is not a “risk.” Inputs matter: the chosen threshold, measurement frequency, and return series quality can materially change the ratio. Allocators use Sortino to complement Sharpe, drawdown metrics, and qualitative process evaluation.

**Decision Authority & Governance**
Governance requires transparent methodology: threshold selection, time horizon, frequency (monthly/quarterly), and data quality (smoothing effects in private markets). Institutions distrust ratios without clear calculation notes.

**Common Misconceptions**

- Sortino is always superior to Sharpe.

- The threshold choice doesn’t matter.

- Sortino is comparable across strategies without context.

**Key Takeaways**

- Sortino focuses on downside risk efficiency.

- Methodology transparency determines trust.

- Use alongside drawdown and liquidity measures.

## Related terms

[Sharpe Ratio](https://altss.com/glossary/sharpe-ratio)[Volatility](https://altss.com/glossary/volatility)[Drawdown](https://altss.com/glossary/drawdown)

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