The Calmar Ratio measures return against the single worst loss the strategy inflicted, rather than against average volatility. That makes it the closest metric on the analytics screen to the question an investor actually asks: was the growth worth the worst moment.
Calmar = CAGR / abs(max drawdown)
Worked example: a strategy compounding at 18% a year with a maximum drawdown of 32% has a Calmar Ratio of 18 / 32 = 0.56. Every point of annual growth was purchased with about 1.8 points of peak-to-trough decline.
saral.money reports the Calmar Ratio over the full backtest window from the dense daily equity curve. Fund factsheets more often quote a trailing 36-month Calmar, so the two are not directly comparable unless your backtest happens to be three years long.
Reading the number
| Calmar Ratio | Interpretation |
|---|---|
| Below 0.3 | Growth is small relative to the pain required to earn it |
| 0.3 to 0.5 | Typical of a long-only Indian equity strategy across a full cycle |
| 0.5 to 1.0 | Good |
| Above 1.0 | Strong, and worth checking whether the window simply excluded a crash |
Caveats
The denominator is one number from one day. Maximum drawdown is set by the single worst peak-to-trough episode in the sample, which makes the Calmar Ratio extremely sensitive to your start date. A backtest beginning in April 2020 skips the March 2020 crash, when the Nifty 50 fell roughly 40% from its January high in about five weeks, and will report a flattering Calmar for reasons that have nothing to do with the strategy.
Longer backtests almost always show lower Calmar Ratios, because a longer window contains more chances to hit a bad drawdown. Comparing a 3-year Calmar against a 15-year Calmar is not a comparison.
It ignores how long the drawdown lasted. A 30% decline recovered in four months and a 30% decline that stayed underwater for four years produce the same Calmar Ratio and completely different experiences. Read Drawdown Duration alongside it.
There is no risk-free adjustment. In a period when Indian government bonds yielded 7%, a Calmar of 0.4 on a 10% CAGR is a different proposition than the same ratio when the risk-free rate is 3%.