Calmar Ratio Calculation System Development
Calmar Ratio (Compound Annual growth rate / Maximum drawdown) evaluates strategy return relative to its worst historical decline. This is especially important metric for traders for whom maximum drawdown is a key constraint.
Formula: Calmar = CAGR / |Max Drawdown|
Interpretation: Calmar > 1.0 — strategy earns more per year than its maximum drawdown. > 3.0 — excellent result. Calmar < 0.5 — drawdown too large relative to return.
Comparison of metrics:
| Metric | What it measures | When to use |
|---|---|---|
| Sharpe | Return / all risks | Universally |
| Sortino | Return / downside risk | Asymmetric strategies |
| Calmar | Return / max drawdown | With strict drawdown limit |
System calculates Calmar, MAR and Sterling Ratio with rolling window analysis, benchmarking against BTC buy-and-hold and visualization in portfolio dashboard.