Calmar Ratio
Encyclopedia
Calmar ratio is a performance measurement used to evaluate Commodity Trading Advisors
and hedge fund
s. It was created by Terry W. Young and first published in 1991 in the trade journal Futures.
Young owned California Managed Accounts, a firm in Santa Ynez, California, which managed client funds and published the newsletter CMA Reports. The name of his ratio "Calmar" is an acronym of his company's name and its newsletter: CALifornia Managed Accounts Reports. Young defined it thus:
Young believed the Calmar ratio was superior because
It should be mentioned that a competitor newsletter, Managed Account Reports (founded in 1979 by publisher Leon Rose), had previously defined and popularized another performance measurement, the MAR Ratio, equal to the compound annual return from inception, divided by the maximum drawdown
from inception.
Although the Calmar ratio and MAR ratio are sometimes assumed to be identical, they are in fact different: Calmar ratio uses 36 months of performance data, whereas MAR ratio uses all performance data from inception onwards.
Commodity trading advisor
A commodity trading advisor is an asset manager who follows a set of systematic investment strategies in futures contracts and options on futures contracts. The advisors originally operated predominantly in commodities markets, but today they invest in any liquid futures market. They are...
and hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s. It was created by Terry W. Young and first published in 1991 in the trade journal Futures.
Young owned California Managed Accounts, a firm in Santa Ynez, California, which managed client funds and published the newsletter CMA Reports. The name of his ratio "Calmar" is an acronym of his company's name and its newsletter: CALifornia Managed Accounts Reports. Young defined it thus:
Young believed the Calmar ratio was superior because
It should be mentioned that a competitor newsletter, Managed Account Reports (founded in 1979 by publisher Leon Rose), had previously defined and popularized another performance measurement, the MAR Ratio, equal to the compound annual return from inception, divided by the maximum drawdown
Drawdown (economics)
The Drawdown is the measure of the decline from a historical peak in some variable ....
from inception.
Although the Calmar ratio and MAR ratio are sometimes assumed to be identical, they are in fact different: Calmar ratio uses 36 months of performance data, whereas MAR ratio uses all performance data from inception onwards.