Reading Risk Metrics: CAGR, Drawdown, Volatility, Sharpe, and Sortino Together

Every strategy page and simulator result on this site reports the same five core numbers: CAGR, Max Drawdown, Volatility, Sharpe Ratio, and Sortino Ratio. Each one answers a different question, and reading them together gives a far more complete picture than looking at any single one in isolation — especially the temptation to rank strategies purely by CAGR, which ignores how much risk was taken to get there.

CAGR answers "how much did this grow, on average, per year?" It's the headline number most people look at first, but it says nothing about the ride along the way. Max Drawdown answers "what's the worst decline I would have lived through?" — arguably the most emotionally relevant number, since large drawdowns are what cause investors to panic-sell at the worst possible time. Volatility answers "how much did returns bounce around, in both directions?" It's a broader measure of uncertainty than drawdown alone.

Sharpe Ratio and Sortino Ratio both try to combine return and risk into a single "efficiency" score — how much return you got per unit of risk taken — but they define risk slightly differently. Sharpe penalizes all volatility, including big up months; Sortino only penalizes downside volatility, which is arguably closer to how most investors actually experience risk.

A useful way to read all five together: start with Max Drawdown and Volatility to understand "could I have lived through this strategy emotionally?" Then look at CAGR to see the growth you'd have been compensated with for taking that risk. Finally, use Sharpe and Sortino to compare whether a different strategy might have delivered a similar CAGR with a meaningfully smoother ride. This site's Compare tool is built specifically to make that side-by-side comparison easy across any two to five strategies.