What does Sterling ratio measure?
✅ Higher = more return relative to the declines per year
Like the Calmar ratio, but using the average of the largest declines per year instead of only the single largest decline. A single crisis year therefore carries less weight.
Background: Deane Sterling Jones, 1981 — originally with −10% in the denominator. Paperball uses today's common form with +10% (Carl Bacon, “Practical Portfolio Performance Measurement”).
How is Sterling ratio calculated?
CAGR / (Ø largest decline per year + 10%)
Ø largest decline per year = average of the largest declines in consecutive blocks of 252 trading days; an incomplete last block does not count (with fewer than 252 trading days, the overall largest decline is used) · the +10 percentage points keep the denominator well above zero even for very calm portfolios
How are values of Sterling ratio usually read?
- < 0.4
- low
- 0.4 – 0.7
- medium
- > 0.7
- high
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 | Sterling ratio |
|---|---|---|---|---|
| 100 % | 0 % | 0 % | 12.69 % | 0.55 |
| 60 % | 40 % | 0 % | 8.37 % | 0.45 |
| 40 % | 40 % | 20 % | 7.99 % | 0.49 |
| 0 % | 100 % | 0 % | 1.59 % | 0.11 |
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 Sterling ratio useful?
When a single crisis year should not decide the comparison on its own.
What are the limits of Sterling ratio?
The 10-percentage-point add-on is a convention and dampens differences: at 10% annual return the value is at most 1.0, even with no decline at all. Values from sources that subtract 10 are not comparable.
Where do you see Sterling ratio for your own securities?
In the portfolio backtester, Sterling ratio appears for every calculated allocation of your securities. The Watchlist shows it for each individual security.
Last updated: 30 Oct 2026