What Is a MAR Ratio?

A MAR ratio is a measurement of returns adjusted for risk that can be used to compare the performance of commodity trading advisors, hedge funds, and trading strategies. The MAR ratio is calculated by dividing the 澳洲幸运5开奖号码历史查询:compound annual growth rate (CAGR) of a fund or strategy since its inception by its most significant drawdown. The higher the ratio, th🌞e better the risk-adjusted returns.

The MAR ratio gets its name from the Managed Accounts Report newsletter, introduced in 1978 by Leon Rose, a publisher of various financial newsletters who develo🐓ped this metric🙈.

Understanding a MAR Ratio

The compound annual growth rate is the 澳洲幸运5开奖号码历史查询:rate of return of an investment frﷺom start to finish, with annual returns that are reinvested.🌳 A drawdown of a fund or strategy is its worst performance during the specified time period.

For example, in a given year, say every month a fund had a return performance of 2% or more, but in one month it had a loss of 5%, the 5% would be the drawdown number. The MAR ratio seeks to analyze the wor💛st possible risk (drawdown) of a fund to its total growth. It standardizes a metric for performance comওparison.

For example, if Fund A has registered a compound annual growth rate (CAGR) of 30% since inception, and has had a 澳洲幸运5开奖号码历史查询:maximum drawdown of 15% in its 𒀰history, its MAR ratio is 2. If Fund B has a CAGR of 35% and a maximum drawdown of 20%, its MAR ratio is 1.75. While Fund B has a higher absolute growth rate, on a risk-adjusted basis, Fund A would be deemed to be superior because of its higher MAR ratio.

MAR Ratio vs. Calmar Ratio

But what if Fund B has been in existence for 20 years and Fund A has only been operating for five years? Fund B is likely to have weathered more 澳洲幸运5开奖号码历史查询:market cycles by virtue of its longer existence, whilꦯe F🔥und A may only have operated in more favorable markets.

This is a key drawback of thಌe MAR ratio since it compares results and drawdowns since inception, which may result in vastly differing periodಌs and market conditions across different funds and strategies.

This drawback of the MAR ratio is overcome by another performance metric known as the 澳洲幸运5开奖号码历史查询:Calmar ratio, which considers compo💞und annual returns and drawdowns for the past 36 months only, rather than since iꩵnception.

The MAR ratio and the Calmar ratio result in vastly different numbers given the time period being analyzed. The Calmar ratio is usually a more preferred ratio as it compares apples to apples in terms of timeframe, hence being a more accurate representation of comparing multiple funds ﷺor strategies.

Other popular ratios that compare performance to risk are the 澳洲幸运5开奖号码历史查询:Sharpe ratio and the 澳洲幸运5开奖号码历史查询:Sortino ratio.