I was wondering what a "good" range was for sortino ratio. I ran an algorithm for past two years and got 5.34 is this decent?
It is probably too good to be true.
When you compute downside deviation, you begin by summing (r_i - r_0)^2 for all r_i < r_0, where r_i are your daily returns and r_0 is the risk-free rate. Did you then divide by the total number of days, or the total number of days when r_i < r_0? In the former case, you will get Sortino ratios about 40% larger on average than the latter case. People do it both ways.
Even with the 40% boost, 5.34 is not a credible ex ante Sortino ratio for an unlevered low or moderate frequency equity strategy. My guesses are it's a calculation error, or it was data-mined, or it uses unrealistic execution assumptions.
It's easy to find strategies with ex post 5.34 and higher Sortino ratios over two years. Individual stocks often have them.
To answer your question, a solid long-term backtest of an unlevered, low frequency equity strategy showing a Sortino ratio above one, after adjusting for data mining, and based on solid economic fundamentals, would be considered very good. A two year Sortino of any number, especially without adjustment or economics, would not be impressive.
Please sign in or
join Quantopian to
post a reply.
Need help?
Contact support.
Company
Learn & Support
Notices
Follow Us
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.
In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.