Sortino Ratio not calculated correctly

[NickyD]

Sometimes it seems like strategy analyzer doesn't calculate the Sortino correctly. I think it incorrectly returns a value of 1 too often. Can you take a look at these numbers and confirm that the Sortino on the Strategy Analyzer summary screen is incorrect? Or let me know where my disconnect is?

Picture of summary screen attached and these are the monthly max drawdown numbers from the analysis screen of the pictured results.

Jan	-2925
Feb	-8350
March	-3890
Apr	-6630
May	-3440
June	-4695
July	-8225
Aug	-3925
Sept	-7300
Oct	-8980
Nov	-4295
Dec	-8760

STDEV of MaxDrawDown: 2304.27

Avg Monthly Return: 7502.50

Sortino Monthly: 7502.50 / 2304.27 = 3.26

Sortino Annualized: 3.26 * SQRT(12) = 11.28


Thanks,
Nick

[NinjaTrader_Kate]

Hello NickyD,

Thank you for your post.

What version of NinjaTrader are you using? You can check this under Help > About. The current version is 8.0.23.2 - if you aren't on this version please update to rule out a versioning issue.

NinjaTrader calculates the Sortino Ratio with the following Formula:

(Profit per Month – risk free Rate of Return) / standard deviation of monthly drawdown

That's the short version of how it's calculated, but under the hood NinjaTrader uses this formula that's publicly available here:

http://www.redrockcapital.com/Sortin...ck_Capital.pdf

One reason the Sortino Ratio is set to a value of "1" if there is insufficient data to calculate the monthly standard deviation of profits (i.e., there is only 1 month of trade history or less). A month is defined as 30.5 days which is the (number of days) / (number of months in a year considering leap year)

There are a couple of issues with hand calculating this value so it matches what's in NinjaTrader:

• The 30.5 days in a month: When you view the data by month in the analysis tab, this is not following that rule (it's going by the actual months),So you are going to get different values than what the calculation is using.
• Because of that, you have to manually calculate both profit per month and target downside deviation from the analysis display (not the summary display) to even get a mathematically correct Sortino to compare with.
• The best you can do is check that your correct manual calculation is not wildly different from what NT8 displays. It is going to be different to varying degrees based on months getting dropped in the NinjaTrader Sortino calculation and not in the user Sortino calculation and vice versa because of what trades fell into what month, resulting in different net profit percentages.

If you calculate the Sortino using the formula above are you still seeing it very far off from what you're manually calculating?

Thanks in advance; I look forward to assisting you further.