What does Martin ratio measure?
✅ Higher = more return relative to the Ulcer Index
Relates the annual return to the Ulcer Index, which takes into account the depth and duration of periods below an earlier peak. Also known as the Ulcer Performance Index (UPI).
Background: Peter G. Martin & Byron McCann, "The Investor's Guide to Fidelity Funds", 1989.
How is Martin ratio calculated?
CAGR / Ulcer Index
Ulcer Index = √(Σ DD² / n) - squared drawdowns averaged; penalises deep AND long losses more heavily
How are values of Martin ratio usually read?
- < 1
- low
- 1 – 3
- high
- > 3
- very high (rarely lasting)
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 | Ulcer Index | Martin ratio |
|---|---|---|---|---|---|
| 100 % | 0 % | 0 % | 12.69 % | 6.24 | 2.03 |
| 60 % | 40 % | 0 % | 8.37 % | 4.98 | 1.68 |
| 40 % | 40 % | 20 % | 7.99 % | 3.63 | 2.20 |
| 0 % | 100 % | 0 % | 1.59 % | 8.96 | 0.18 |
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 Martin ratio useful?
When the duration of declines matters to you as well as their depth.
What are the limits of Martin ratio?
Because the Ulcer Index squares the declines, deep declines weigh especially heavily; a single long crisis can decide the result. The ratio is not widely used. Compare portfolios over the same period and with the same calculation rules.
Where do you see Martin ratio for your own securities?
In the portfolio backtester, Martin ratio appears for every calculated allocation of your securities. The Watchlist shows it for each individual security.
Last updated: 30 Oct 2026