I noticed the percentage increase of Asset B Sortino Ratio over Asset A Sortino Ratio is different if Target Return is set to 0% for the numerator instead of Risk Free Rate. I noticed if I were to compare two assets (Sensex and 70% Gold 30% Sensex Portfolio) 10 Year Rolling Sortino Ratios and I assume >30% increase in Sortino Ratio is meaningful the frequency of such observations goes from 79% if we assume target return of 0% for the numerator of Sortino Ratio to 36% if we assume target return of Risk Free Rate for the numerator of Sortino Ratio.
In both cases when I am assuming 0% target return and I am assuming RF as target return the Target Downside Deviation is considering returns which are below RF as Downside. This major difference in frequency is only for Gold portfolios. If I were to look at foreign equity portfolios the frequency does not change that much if I assume either 0% target return or RF as target return for the numerator of the Sortino Ratio .
Strange results with Rolling Sortino comparison for portfolios that contain Gold.
Strange results with Rolling Sortino comparison for portfolios that contain Gold.
Land/Real Estate:89.4% (Land/RE is Inheritance which will be recieved in 10-20 years) Equities:7.6% Fixed Income:1.7% Gold:0.8% Cryptocurrency:0.5%