sortino_ratio: Sortino Ratio
In stocks: Stock Market Analysis

Description Usage Arguments Value Note Author(s) References See Also Examples

Calculate Sortino ratio based on a vector of gains or prices. The formula is: (mean(gains) - rf) / sd(negatives(gains)). Here rf is some risk- free rate of return, gains is a vector of gains (usually daily, but could be any time interval), and negatives(gains) gets the subset of gains that are negative.

sortino.ratio(gains = NULL,
              prices = NULL,
              rf = 0,
              nas = FALSE)

`gains`	Numeric vector of gains.
`prices`	Numeric vector of investment prices (typically daily closing prices).
`rf`	Risk-free rate of return hypothetically available to the investor.
`nas`	If `TRUE`, function finds and removes any missing values (`NA`s) in `prices`. The default is `FALSE` to maximize speed for the usual case where there are no missing values.

Numeric value indicating the Sortino ratio.

Several definitions of Sortino ratio are commonly used; this simple version may or may not be the one you prefer.

Dane R. Van Domelen

Acknowledgment: This material is based upon work supported by the National Science Foundation Graduate Research Fellowship under Grant No. DGE-0940903.

gains.rate, prices.rate, mdd, sharpe.ratio, rrr

# Randomly generate daily stock gains over a 5-year period
set.seed(123)
stock.gains <- rnorm(252 * 5, 0.0005, 0.01)

# Calculate Sortino ratio using risk-free return of 0
sortino.ratio(stock.gains)