Sterling Ratio¶
The Sterling ratio (SR) is a measure of the risk-adjusted return of an investment portfolio.
Core Idea¶
Sterling Ratio is treated here as the recurring formal models and representations identity summarized by this source-grounded definition: The Sterling ratio (SR) is a measure of the risk-adjusted return of an investment portfolio. The Sterling ratio (SR) is a measure of the risk-adjusted return of an investment portfolio. While multiple definitions of the Sterling ratio exist, it measures return over average drawdown, versus the more commonly used max drawdown. While the max drawdown looks back over the entire period and takes the worst point along that equity curve, a quick change of the look back.
Scope of Application¶
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Documented setting. While multiple definitions of the Sterling ratio exist, it measures return over average drawdown, versus the more commonly used max drawdown.
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Documented setting. To clarify the reason, he (Deane Sterling Jones) used 10% in the denominator was to compare any investment with a return stream to a risk-free investment (T-bills).
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Documented setting. While the max drawdown looks back over the entire period and takes the worst point along that equity curve, a quick change of the look back allows one to see what.
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Documented setting. The Sterling ratio (SR) is a measure of the risk-adjusted return of an investment portfolio.
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Documented setting. From there, the drawdowns of each year are averaged to come up with an average annual drawdown.
Clarity¶
A clear use of Sterling Ratio names the carrier, the operative relation, and the conditions under which the source treats the identity as present. The minimal definition is The Sterling ratio (SR) is a measure of the risk-adjusted return of an investment portfolio. The strongest recognition evidence in the frozen account is: The Sterling ratio (SR) is a measure of the risk-adjusted return of an investment portfolio.
Manages Complexity¶
Sterling Ratio compresses multiple formal models and representations details into a stable diagnostic relation. The source shows both the central mechanism—if the drawdown is put in as a negative number, then subtract the 10%, and then multiply the whole thing by a negative to result in a positive ratio.—and the practical consequence—from there, the drawdowns of each year are averaged to come up with an average annual.
Abstract Reasoning¶
- Type the carrier. Identify the formal models and representations entities to which the claim applies.
- State the relation. Use the source-grounded identity: The Sterling ratio (SR) is a measure of the risk-adjusted return of an investment portfolio.
- Check operation and conditions. While the max drawdown looks back over the entire period and takes the worst point along that equity curve, a quick change of the look back allows one to see what the worst peak to valley loss was for each calendar year as well.
Knowledge Transfer¶
Within the home domain. Knowledge about Sterling Ratio transfers literally when a new case preserves the same carrier type, relation, and recognition test. While multiple definitions of the Sterling ratio exist, it measures return over average drawdown, versus the more commonly used max drawdown. To clarify the reason, he (Deane Sterling Jones) used 10% in the denominator was to compare any investment with a return stream to a risk-free investment (T-bills). Beyond the home domain. No canonical parent is asserted for Sterling Ratio.
Relationships to Other Abstractions¶
Current abstraction Sterling Ratio Domain-specific
Parents (1) — more general patterns this builds on
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Sterling Ratio is a kind of Measurement Prime
Sterling Ratio is a strict kind of Measurement: its frozen identity entails the parent's defining structure while adding domain-specific restrictions.
Hierarchy path (1) — routes to 1 parentless root
- Sterling Ratio → Measurement
Neighborhood in Abstraction Space¶
Sterling Ratio sits in a moderately populated region (45th percentile for distinctiveness): it has near-neighbors but no dense thicket of look-alikes.
Family — Financial Ratios & Instruments (20 abstractions)
Nearest neighbors
- Put/Call Ratio — 0.90
- Merton's portfolio problem — 0.87
- Deleveraging — 0.87
- Value at risk — 0.86
- Loss ratio — 0.86
Computed from structural-signature embeddings · 2026-10-08