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Measure risk-adjusted return using downside deviation instead of total volatility.
Sharpe penalizes all volatility (upside and downside). Sortino only penalizes downside volatility, making it more appropriate for asymmetric return strategies.
Downside deviation measures the standard deviation of returns that fall below the minimum acceptable return (MAR). It ignores positive deviations.
A Sortino ratio above 2 is generally considered good. Above 3 is excellent. It should be compared within the same asset class or strategy type.