Performance Summary: Sortino Ratio

The Sortino ratio is a variation of the Sharpe ratio. Unlike the Sharpe ratio, its is calculated using the standard deviation of the downside risk, rather than that of the entire (upside + downside) risk. Due to this, it is thought to give a better view of a portfolio's risk-adjusted performance because positive volatility is considered a benefit.

The formula for the Sortino ratio is SR = (MR - RFR) / DD, where MR is the average return for a period (monthly for a trading period of 3 or more months or daily for a trading period of 3 or more days), and RFR is the risk-free rate of return (by default, 2% annually. Can be changed with the "risk_free_rate" parameter of the "strategy()" function). DD is the downside deviation of returns = sqrt(sum(min(0, Xi - T))^2/N), where Xi - ith return, N - total number of returns, T - target return.