Sharpe vs Sortino and Custom Summary Results

When it comes to performance statistics in backtesting, every system builder has a favorite set for gauging the effectiveness of a strategy.  One popular metric, the Sharpe ratio, was introduced in 1966 by Stanford professor Dr. William Forsyth Sharpe and measures return relative to volatility. Volatility is measured as the annualized standard deviation of returns.  One drawback to the Sharpe ratio is that it penalizes both negative and positive return volatility, so a strategy such as trend following that cuts losses short and lets profits run could arguably be penalized unfairly.  An alternative to the Sharpe ratio was developed by Dr. Frank A. Sortino in 1980.  The Sortino ratio also measures return relative to volatility, but only considers negative return volatility.

In Trading Blox, the Summary Results are shown after a test is completed, and the Annual Sharpe ratio can be found among the statistics at the top of the report.

This top line is helpful to see important summary information, and makes it easy to compare between different test runs.  The Annual Sortino ratio can be found after many pages of scrolling, near the bottom of the Summary Results report in the Trading Performance section.  Any statistic such as the Annual Sortino ratio can be added to the top of the Summary Results by calling the function AddStatistic in the After Test script, allowing the trader to have their own set of metrics handy for finding the strategy that fits them best.