What does Recovery ratio measure?
✅ Higher = more return relative to the longest time below the peak
The annual return divided by the longest time below an earlier peak, in years. If the peak has not been regained by the end of the period, the time up to the last day counts.
How is Recovery ratio calculated?
CAGR / T_DD
T_DD = longest time below the peak in years (trading days ÷ 252) · CAGR = annual return as a fraction (12% = 0.12)
How are values of Recovery ratio usually read?
- < 0.05
- low (slow recovery)
- 0.05 – 0.2
- medium
- > 0.2
- high (fast recovery)
Rules of thumb — where a value lands depends on asset class, period and market phase. A classification is no recommendation.
Worked example with real prices
Three securities from the test data, four allocations, calculated in the portfolio backtester over the same period:
| World equities | Euro government bonds | Gold | CAGR | Drawdown duration | Recovery ratio |
|---|---|---|---|---|---|
| 100 % | 0 % | 0 % | 12.69 % | 435 days | 0.07 |
| 60 % | 40 % | 0 % | 8.37 % | 576 days | 0.04 |
| 40 % | 40 % | 20 % | 7.99 % | 559 days | 0.04 |
| 0 % | 100 % | 0 % | 1.59 % | 1,481 days | 0.00 |
Prices from 13 Nov 2009 to 7 Oct 2026 in euros, starting capital €10,000, annual rebalancing, without order fees and taxes; Sharpe ratio with a risk-free rate of 2 %. Past results are no indication of future ones.
All three securities are in the test data — you can recalculate the example yourself on the free plan.
When is Recovery ratio useful?
When you want to know how long a portfolio stayed below its peak, measured against its return.
What are the limits of Recovery ratio?
Depends on a single stretch: the longest drawdown duration alone determines the value — unstable with a short history. Says nothing about the DEPTH of drawdowns.
Where do you see Recovery ratio for your own securities?
In the portfolio backtester, Recovery ratio appears for every calculated allocation of your securities. The Watchlist shows it for each individual security.
Last updated: 30 Oct 2026