Ulcer Index (UI)

What is ‘Ulcer Index – UI’

A technical indicator that measures downside risk, in terms of both depth and duration of price declines. The Ulcer Index (UI) increases in value as the price moves farther away from a recent high, and falls as the price rises to new highs. The indicator is usually calculated over 14 days, with the UI showing the percentage drawdown a trader can expect from the high over that period.

Explaining ‘Ulcer Index – UI’

Developed by Peter Marin and Byron McCann in 1987 for analyzing mutual funds, the indicator only looks at downside risk, not overall volatility like standard deviation.

Ulcer Index (ui) FAQ

How is Calmar ratio calculated?

To calculate a fund’s Calmar ratio, take the average annual rate of return, and divide it by the maximum drawdown from the same time period. For instance, if a fund’s average annual rate of return for the past three years is 20%, and its maximum drawdown is 70%, then the Calmar ratio is 0.29.

What does a Sharpe ratio mean?

A Sharpe ratio measures a financial portfolio’s risk-adjusted return. When compared to its peers, a portfolio with a higher Sharpe ratio is considered superior. The measure was named after finance professor William F Sharpe, a Nobel Laureate.

How do you use ulcer index?

The Ulcer Index is used to compare the amount of risk of various investment options. A higher average UI indicates a higher amount of risk. To compare the overall volatility of stocks and funds, a moving average can be applied to the Ulcer Index.

What does the Sortino ratio mean?

A variation of the Sharpe ratio, the Sortino ratio measures the risk of a portfolio using the downside deviation of returns instead of standard deviation.

What is a good Sharpe ratio?

Generally, investors consider a Sharpe ratio greater than 1.0 to be acceptable. A ratio higher than 2.0 is considered to be very good, and higher than 3.0 is excellent. A poor Sharpe ratio is one that is less than 1.0.

What is a good Sortino ratio for a mutual fund?

A Sortino ratio of 2.0 is considered to be good.

Further Reading