Calmar Ratio — Return
CAGR divided by Max Drawdown % — risk-adjusted return relative to worst decline on the Return curve.
- Computed from
- Equity curve
- Scope
- Single report
- Range
- Any real number
- Direction
- Higher is better
The Calmar ratio measures return against the worst thing that happened. It divides your average yearly growth (CAGR — compound annual growth rate) by your worst drop (maximum drawdown, the deepest peak-to-trough fall) — so it answers the question a real account holder actually asks: how much did I earn per unit of the deepest hole I had to sit through?
One caveat up front: the textbook Calmar uses a trailing 36-month window. EquityTruth computes it over your whole record, so this number isn't directly comparable to the published Calmars of CTAs/funds, and it shifts as the record grows.
How it's calculated
Calmar = CAGR / |Max Drawdown|
- CAGR
- compound annual growth rate of the curve
- Max Drawdown
- largest peak-to-trough decline, as a positive magnitude
What it tells you
| Value | Reading | Notes |
|---|---|---|
| < 0.5 | Fragile | A single bad stretch dwarfs a year of returns. |
| 0.5 – 1 | Modest | Drawdown is on the same order as annual return. |
| 1 – 3 | Solid | A year of returns comfortably exceeds the worst fall. |
| > 3 | Strong | Returns are large relative to the deepest hole. |
These bands assume a record long enough to have actually met a real drawdown. On a short history a tiny denominator (no big drop yet) can produce a flatteringly high Calmar — treat readings on under ~1 year of data with suspicion.
Worked example
An account compounds at 30%/year (CAGR) and its deepest drawdown was 15%:
Calmar = 30% / 15% = 2.0
Two units of annual return for every unit of worst-case pain — a solid result.
Pitfalls
- Built on the worst drawdown you've seen, not the worst that can happen. Max drawdown is an in-sample extreme; the true forward worst case is usually deeper. So Calmar tends to flatter a strategy — especially a young one that hasn't lived through a bad regime yet.
- Not comparable across records of different length. Because it's the full-record Calmar (not the trailing-36-month textbook version), a longer record that finally caught a deep drawdown reads worse than a short one that hasn't — even for the same strategy. Don't rank two records on Calmar unless their histories are similar in length.
- One number, one event. Max drawdown is a single historical worst case; lengthen the record and a new, deeper drawdown can appear, dropping Calmar sharply even though nothing about the strategy changed.
- Blind to recovery speed. Two strategies with the same CAGR and same max drawdown score an identical Calmar even if one clawed back in three months and the other took three years. Read it with time under water and the Ulcer Index.
- Not cleanly leverage-invariant. Unlike Sharpe, Calmar doesn't survive leverage changes neatly: leverage scales return roughly linearly, but drawdown can compound toward ruin, so doubling size won't double your Calmar.
Calmar vs Sharpe
Sharpe measures risk as everyday volatility; Calmar measures risk as the single worst drawdown. A strategy can have a great Sharpe (smooth most of the time) yet a poor Calmar (one brutal crash) — and that contrast is exactly what makes reading them together worthwhile.