Burke Ratio
Computes the Burke ratio: the excess return over the risk-free rate divided by the square root of the sum of squared drawdowns. Unlike the Sharpe ratio, which penalizes all volatility, Burke focuses only on the falls, and by squaring each drawdown it punishes deep falls more than shallow ones. It's one of the tail-risk-adjusted performance metrics. Enter the portfolio return, the risk-free rate and the list of drawdowns in percent.
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Burke Ratio
Computes the Burke ratio: the excess return over the risk-free rate divided by the square root of the sum of squared drawdowns. Unlike the Sharpe ratio, which penalizes all volatility, Burke focuses only on the falls, and by squaring each drawdown it punishes deep falls more than shallow ones. It's one of the tail-risk-adjusted performance metrics. Enter the portfolio return, the risk-free rate and the list of drawdowns in percent.
Sharpe, but punishing the deep falls
The Sharpe ratio treats all volatility as bad, including upward moves. For the investor, though, swinging upward isn't a problem; it's the falls that hurt. The Burke ratio responds to this by measuring return per unit of drawdown, not of total volatility, focusing only on what actually causes pain.
The detail that sets Burke apart is squaring each drawdown before summing. That makes a big fall weigh disproportionately more than several small ones, reflecting the idea that a single devastating drop is worse than many tiny dips. The higher the ratio, the better the return earned relative to the risk of deep falls.
Enter the portfolio return, the risk-free rate and the list of drawdowns in percent. The tool uses Burke's original form, with the plain sum of squares, without dividing by the number of observations. The modified version, which divides by N, gives a different number, so keep the same convention when comparing portfolios.
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Sterling Ratio
Computes the Sterling ratio, a drawdown-adjusted performance measure. It divides return by a measure of how much the portfolio typically falls from peak to trough, rewarding strategies that deliver return without big drops. The tool shows two versions: the modern one, using excess return over the risk-free rate divided by the average drawdown, and the original Deane Sterling Jones form, which adds a ten percent constant to the denominator. Enter the annualized return, the risk-free rate and the average annual maximum drawdown.
Sharpe Ratio from Series
Computes the Sharpe ratio directly from a series of returns: the mean return minus the risk-free rate, divided by the sample standard deviation. It's the most practical way to get the Sharpe when you have the history at hand, without computing the mean and volatility separately. Remember the result comes in the frequency of the data entered — to annualize monthly returns, multiply by the square root of twelve. Enter the list of returns and the risk-free rate for the same period.
Modigliani M² Measure
Computes Modigliani's M² measure (also M-squared or RAP), which translates the Sharpe ratio back into percentage points of return. The idea is plain: scale the portfolio to the market's volatility and ask what it would have returned under those conditions, M² = Rf + (Rp − Rf)·(σmarket/σportfolio). Unlike the Sharpe ratio, a bare number, M² compares directly against the benchmark's return. Above the market return, the portfolio beat the benchmark on a risk-adjusted basis. Enter the portfolio return and volatility, the risk-free rate and the market volatility.
The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.