Sortino ratio

For this exercise, the portfolio returns data are stored in a DataFrame called df, which you'll use to calculate the Sortino ratio. The Sortino ratio is just like the Sharpe ratio, except for that it uses the standard deviation of the negative returns only, and thereby focuses more on the downside of investing.

Let's see how big the Sortino ratio is compared to the earlier calculated Sharpe ratio. The risk-free rate rfrand the target return target are already defined and are both zero.

Set the new downside returns column equal to the portfolio returns column, only where the return is below the target.
Calculate the mean of the expected returns, and the standard deviation of the downside risk.
Calculate the Sortino ratio using rfr for the risk-free rate.

Take Hint (-30 XP)

Exercise

Sortino ratio

Instructions