CDaR Ratio
The CDaR ratio divides the annual excess return by the conditional drawdown at risk at 95%: the mean of the deepest 5% of daily drawdowns. Where the Calmar ratio reads one worst drawdown, this reads the whole tail of them.
Mathematical Formulation
Definition
CDaR is the reported cdar_95 on the compounded drawdown, a positive fraction of the running peak. It is not the uncompounded figure that MinCDaR minimizes; that one is cdar_95_uncompounded. The numerator is the Sharpe ratio's numerator.
Reading it
The value is null when CDaR is zero, on a track that never fell below a previous peak in its worst 5% of days.
Drawdowns are not annual quantities. The ratio puts an annual return over a drawdown fraction, as the Calmar ratio does, so its scale depends on the window length.
A higher ratio describes the run window only. It is not evidence that the portfolio will perform better in the future, and no method is validated out of sample.
Where FolioLab reports it
results.<method>.performance.cdar_ratio: the annual excess return over CDaR (95%) of the compounded drawdown, or null.
The value appears on the result page under Performance Ratios, in the PDF and Excel reports, in the compare view and through the MCP explain_metric tool. A run stored before this ratio existed does not carry it.
References
- Chekhlov, A., Uryasev, S., & Zabarankin, M. (2005). "Drawdown Measure in Portfolio Optimization." International Journal of Theoretical and Applied Finance, 8(1), 13-58.
Not investment advice. Past performance is not indicative of future results.