The Sharpe ratio uses standard deviation to measure a fund's risk-adjusted returns. The higher a fund's Sharpe ratio, the better a fund's returns have been relative to the risk it has taken on
The Sterling ratio formula uses the average compounded return and average risk presented in the form of maximum drawdown. Drawdown is calculated as the maximum potential loss in the given year. The resulting ratio shows the amount of average annual compounded return delivered per unit of average maximum drawdown risk. The higher quantity of return per unit of risk, the more favorable the result as the investor received each unit of return while experiencing a smoother ride.
The Calmar ratio is a comparison of the average annual compounded rate of return and the maximum drawdown risk of commodity trading advisors and hedge funds. The lower the Calmar ratio, the worse the investment performed on a risk-adjusted basis over the specified time period; the higher the Calmar ratio, the better it performed.
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