The Sortino Ratio is a financial metric used to evaluate the risk-adjusted return of an investment. Unlike the Sharpe Ratio, which considers total volatility, the Sortino Ratio focuses only on downside risk, measuring how much an investment's returns fall below a target return or a minimum acceptable return. This makes it particularly useful for investors who are more concerned about losses than overall volatility. To calculate the Sortino Ratio, you subtract the target return from the investment's average return and then divide this by the downside deviation, which measures the variability of negative returns. A higher Sortino Ratio indicates a more favorable risk-adjusted return, helping investors assess the performance of their investments while considering the potential for loss.