The Sortino Ratio is a risk-adjusted performance metric used to evaluate the performance of an investment or portfolio. It differs from the Sharpe Ratio in that it focuses only on downside risk, which makes it more suitable for investments where minimizing downside risk is a key objective. The Sortino Ratio provides a more accurate assessment of risk-adjusted return than the Sharpe Ratio, particularly for highly volatile investments, as it is less affected by extreme returns. The Sortino Ratio measures the excess return of an investment or portfolio over a minimum acceptable return that reflects the investor's downside risk tolerance. The Sortino Ratio is a useful tool for investors who prioritize downside protection and seek to minimize the risk of negative returns.
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