The pain ratio is the analogue to the Sharpe Ratio, with the pain index used instead of the standard deviation:

    Pain Ratio = (AnnRtn(r₁,...,r_n) - AnnRtn(c₁,...,c_n)) / PainIndex(r₁,...,r_n)

where:

    r₁,...,r_n = manager return series
    c₁,...,c_n = cash equivalent return series

To view our quick tip video on Pain Ratio, click the following link:  http://www.styleadvisor.com/sites/default/files/quick_tip_video/pain_rat....

For additional detail, please see our white paper regarding Pain Index and Pain Ratio.