Sortino ratio indicator - - Trading Software

Sortino ratio indicator -

Kiran
2015-04-23 18:54:33

Per definition, Sortino ratio calculates the Downside Standard Deviation by discarding all +ve returns (or returns > "risk-free rate") in the calculation of Std Dev.

I looked at the code of the Sortino ratio indicator function in http://www.quantshare.com/item-1146-sortino-ratio-of-an-asset
and it seems to be throwing away all returns > Average return (not 0 or risk-free rate). This would distort the interpretation of Sortino ratio.

See the code snippet below (trading object also attached) that states - if(ret[j] < avg) { dsdv = dsdv + Math.Pow(ret[j] - avg, 2); }
- Am I missing something?

VectorD ret = TA.Perf(close, 1);

for(int i=0;i<result.Length;i++)
{
int index = i - (int)period[0] + 1;
double avg = 0;
int count = 0;
if(index <= 0)
{
result[i] = double.NaN;
}
else
{
for(int j=index;j<=i;j++)
{
avg = avg + ret[j];
count++;
}
if(count != 0)
{
avg = avg / count;

double dsdv = 0;
for(int j=index;j<=i;j++)
{
if(ret[j] < avg)
{
dsdv = dsdv + Math.Pow(ret[j] - avg, 2);
}
}
dsdv = (Math.Sqrt(dsdv / (count - 1)) * Math.Sqrt(250)) / 100;
double ret1 = Math.Pow(close[i] / close[index-1], (365.5 / (double)count)) - 1;
if(dsdv != 0)
{
result[i] = ret1 / dsdv;
}
}
else
{
result[i] = 0;
}
}
}

cFunctions.SetForwardAndBackwardBars((int)period[0], 0);

Sortino Ratio of an Asset (by QuantShare, uploaded several months ago)

No notes

QuantShare
2015-04-24 02:34:00

No risk free rate was used in this version, only returns below zero are discarded.

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