MAR Ratio (Managed Account Reports, included in WLab under Extended ScoreCard) = APR (%) / Max Drawdown (%)
https://www.investopedia.com/terms/m/mar-ratio.asp
Calmar (not included in WLab) = MAR of most recent 36 months (3 years); the name is ratio creator Terry Young's acronym derived from 'Cal'ifornia Managed Accounts Report (MAR) which he owned.
https://www.investopedia.com/terms/c/calmarratio.asp
[Side note, for historical accuracy: MAR Ratio gets its name from a different newsletter - Managed Account Reports - from a different owner.]
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MAR Ratio gives long term risk-adjusted performance. While that's useful, especially when comparing over equivalent (or nearly so) long time frames, its key drawback is that the lookback period is not standard but rather what the user has set under Strategy Settings which can be as much as 'All Data'. This can lead to wildly different values. e.g. a 25-year portfolio backtest would include the market meltdown at the beginning of the century, the financial crisis of 2008 as well as the Covid pandemic of 2020 - with a sprinkling of Flash Crashes along the way. A 5-year or shorter backtest would've missed many of these episodes causing spuriously high readings making comparisons all but impossible.
The Calmar Ratio, on the other hand, is standardized and looks at the most recent 36 months (3 years) - no more, no less - to calculate the APR % and Max DD %. It gives short-term risk-adjusted performance and can be compared across all strategies as long as lookback period is atleast 3 years (from StartIndex to last bar). It's calculated using monthly values.
IF it's implemented - and I sure hope it is (and soon) - it's imperative that the lookback period be a strict 36 months. If the backtest period is shorter it's best for it to display either "-" or "N/A" instead of forcibly calculating it over the shorter time frame. (The click-text can explain it's strictly calculated over most recent 36 months.)
The perfect place for it in the Backtest ScoreCard would be right under the MAR Ratio or, preferably (and if possible), as its sub-item.
TLDR;
Calmar Ratio is a standardized, short-term (36 month) version of the MAR Ratio that makes apples-to-apples comparison across strategies/portfolios possible, overcoming a key limitation of the MAR Ratio.
https://www.investopedia.com/terms/m/mar-ratio.asp
Calmar (not included in WLab) = MAR of most recent 36 months (3 years); the name is ratio creator Terry Young's acronym derived from 'Cal'ifornia Managed Accounts Report (MAR) which he owned.
https://www.investopedia.com/terms/c/calmarratio.asp
[Side note, for historical accuracy: MAR Ratio gets its name from a different newsletter - Managed Account Reports - from a different owner.]
---------------
MAR Ratio gives long term risk-adjusted performance. While that's useful, especially when comparing over equivalent (or nearly so) long time frames, its key drawback is that the lookback period is not standard but rather what the user has set under Strategy Settings which can be as much as 'All Data'. This can lead to wildly different values. e.g. a 25-year portfolio backtest would include the market meltdown at the beginning of the century, the financial crisis of 2008 as well as the Covid pandemic of 2020 - with a sprinkling of Flash Crashes along the way. A 5-year or shorter backtest would've missed many of these episodes causing spuriously high readings making comparisons all but impossible.
The Calmar Ratio, on the other hand, is standardized and looks at the most recent 36 months (3 years) - no more, no less - to calculate the APR % and Max DD %. It gives short-term risk-adjusted performance and can be compared across all strategies as long as lookback period is atleast 3 years (from StartIndex to last bar). It's calculated using monthly values.
IF it's implemented - and I sure hope it is (and soon) - it's imperative that the lookback period be a strict 36 months. If the backtest period is shorter it's best for it to display either "-" or "N/A" instead of forcibly calculating it over the shorter time frame. (The click-text can explain it's strictly calculated over most recent 36 months.)
The perfect place for it in the Backtest ScoreCard would be right under the MAR Ratio or, preferably (and if possible), as its sub-item.
TLDR;
Calmar Ratio is a standardized, short-term (36 month) version of the MAR Ratio that makes apples-to-apples comparison across strategies/portfolios possible, overcoming a key limitation of the MAR Ratio.
Rename
"Calmar Ratio" was added to Basic Scorecard metrics in b141 rlsd on Nov 17th.
However, it appears to be identical to MAR Ratio which is already present in Extended ScoreCard. Here's a simple way to prove this: Create a Buy and Hold strategy and run it on SPY over different periods e.g. 20, 10, 5, 3 years, etc. The values of MAR and Calmar Ratios are identical in every case which shouldn't be happening as the Max Drawdown occurred in 2008, well beyond the typical lookback period for a true Calmar Ratio (3 years), plus the APR is different over different time periods.
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Calmar Ratio was introduced as a refinement of MAR Ratio with a shorter lookback period - 36 months, or 3 years (https://en.wikipedia.org/wiki/Calmar_ratio). It also adjusts the CAGR (APR) by Risk-free Rate whereas MAR does not.
In the sea of misinformation and sloppiness that pervades the internet I found the following gem that truly illustrates the difference and includes the formulas: https://tradingcenter.org/index.php/learn/fundamental-analysis/355-portfolio-ratios.
I urge the developers to:
- Set the calculation period of Calmar Ratio to 36 months as the author intended
- Use the correct formula
However, it appears to be identical to MAR Ratio which is already present in Extended ScoreCard. Here's a simple way to prove this: Create a Buy and Hold strategy and run it on SPY over different periods e.g. 20, 10, 5, 3 years, etc. The values of MAR and Calmar Ratios are identical in every case which shouldn't be happening as the Max Drawdown occurred in 2008, well beyond the typical lookback period for a true Calmar Ratio (3 years), plus the APR is different over different time periods.
----------------------------------------
Calmar Ratio was introduced as a refinement of MAR Ratio with a shorter lookback period - 36 months, or 3 years (https://en.wikipedia.org/wiki/Calmar_ratio). It also adjusts the CAGR (APR) by Risk-free Rate whereas MAR does not.
In the sea of misinformation and sloppiness that pervades the internet I found the following gem that truly illustrates the difference and includes the formulas: https://tradingcenter.org/index.php/learn/fundamental-analysis/355-portfolio-ratios.
I urge the developers to:
- Set the calculation period of Calmar Ratio to 36 months as the author intended
- Use the correct formula
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