Ulcer Index Calculator

Use this Ulcer Index calculator to measure the depth and duration of an investment's drawdowns from a series of values and see its downside risk.

Ulcer Index Calculator
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Ulcer Index —
Deepest drawdown —
Data points —

We always strive to use the latest data for every variable so our results and reports are as accurate as possible. Even so, errors are possible — you should not rely on this tool or its report alone, and we accept no liability for any decision made based on it.

What it does

The Ulcer Index measures how painful an investment's declines have been. Instead of treating every price move as risk, it looks only at drops from prior peaks and how long they last, giving a single number that reflects the depth and duration of losses.

Data sources & parameters

This calculator uses standard financial formulas and runs entirely in your browser. It needs no external rate data — your result is computed only from the values you enter above.

We always strive to use the latest data for every variable so our results and reports are as accurate as possible. Even so, errors are possible — you should not rely on this tool or its report alone, and we accept no liability for any decision made based on it.

The formula

Ulcer Index = sqrt( average of dd^2 ), where dd = (value − running peak) ÷ running peak × 100

How it works

For each value in the series the tool tracks the highest point reached so far, measures the percentage decline from that peak, squares it, and takes the square root of the average. Squaring makes deep, drawn-out drawdowns dominate the score, while new highs reset the pain to zero.

Where it is used

  • Comparing the downside risk of two funds with similar returns
  • Judging how uncomfortable a strategy's losing stretches have been
  • Feeding the denominator of the Martin (Ulcer Performance) ratio

Worked example

A portfolio moves through $100.00, $95.00, $90.00, back to $100.00, then $85.00. The deepest fall from a peak is …, and the overall Ulcer Index works out to ….

What the Ulcer Index calculator does

The Ulcer Index calculator measures how painful an investment's declines have been, not how much it moves overall. It looks only at falls from previous peaks and how long they last, and condenses that into one number. The name refers to the stress of watching a portfolio sit below its high-water mark.

Enter a short series of values, such as a fund's balance at the end of five periods, and the tool returns the Ulcer Index, the deepest single drawdown in the series, and the number of data points used.

How the Ulcer Index works

Standard deviation and many other risk measures treat a sharp gain the same as a sharp loss, although upside is not what keeps investors awake. Peter Martin designed the Ulcer Index to measure only the downside.

The tool walks through your series, tracking the highest value seen so far, the running peak. At each point it measures how far the current value sits below that peak as a percentage. At a new high the drawdown is zero; after a fall it is negative, more so the deeper the fall.

Each drawdown percentage is squared, the squares are averaged across all data points, and the square root of the average is the Ulcer Index. Squaring removes the sign, so declines never cancel out, and makes deep drawdowns dominate: one large fall contributes far more than several shallow ones.

Depth and duration

A portfolio that drops sharply but recovers within one period is penalised once. One that drops the same amount and stays underwater for several periods registers a drawdown at every point below its old peak and is penalised repeatedly.

Two investments can share the same maximum drawdown while one recovers quickly and the other languishes for a long time. The Ulcer Index gives the lingering decline a higher score, which a worst-drawdown figure alone cannot do.

How to use the calculator

  1. Enter the value of the investment at each of the five points in your series, from earliest to latest.
  2. The calculator tracks the running peak, measures each drawdown, and computes the Ulcer Index.
  3. Read the Ulcer Index, the deepest single drawdown, and the data-point count.

The values can be a fund's net asset value, an account balance, or an index level. Drawdowns are measured in percentages, so the currency and scale do not matter: a series in the hundreds scores the same as the same shape in the millions.

Reading the result

The Ulcer Index has no fixed good or bad threshold. Compare two funds over the same stretch of history; the one with the lower index gave a smoother ride, with shallower or shorter time below its peaks.

A value close to zero means the series spent almost all its time at or near new highs. A large value means deep drawdowns, long recoveries, or both. The deepest single drawdown helps you tell a high index driven by one severe crash from the same index produced by a long, grinding decline.

Where the Ulcer Index fits

The index is best known as the denominator of the Martin ratio, or Ulcer Performance Index, which divides an investment's return above a risk-free rate by its Ulcer Index. The Sharpe ratio uses total volatility as its risk measure; the Martin ratio uses downside pain, which many investors find more meaningful.

On its own, the index helps compare funds, test strategies, and set expectations. A backtest with attractive returns but a high Ulcer Index is a warning that the path to those returns ran through drawdowns most investors would struggle to hold through.

Common mistakes

  • Comparing across different periods. The index only means something relative to another series over the same window.
  • Ignoring the length of the series. A handful of points gives a rough sketch; more data points give a fuller picture.
  • Chasing a low index at the expense of return. A very low Ulcer Index with weak returns may mean an investment barely moved, so read it alongside performance, ideally through the Martin ratio.

This article is general information only and is not financial advice.

About This Ulcer Index Calculator

Use this Ulcer Index calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.

Frequently asked questions

What does the Ulcer Index calculator measure?
It measures downside risk by looking only at declines from prior peaks. The calculator squares each percentage drawdown, averages them, and takes the square root, so deep and long-lasting losses raise the score while gains and new highs do not.
How is the Ulcer Index different from standard deviation?
Standard deviation treats upward and downward moves as equally risky. The Ulcer Index ignores upside entirely and penalises only drawdowns from a running peak, so it better reflects the discomfort an investor feels during a losing stretch.
What is a good Ulcer Index value?
Lower is better, and there is no universal threshold. A value near zero means the series rarely fell below its previous highs, while a large value signals deep or prolonged drawdowns. The number is most useful when comparing two investments over the same period.
Why are drawdowns squared in the formula?
Squaring makes large drawdowns count far more than small ones and keeps every term positive. That makes the Ulcer Index sensitive to the depth and duration of losses more than to the number of small wobbles.
Can I use the Ulcer Index for the Martin ratio?
Yes. The Martin ratio, also called the Ulcer Performance Index, divides an investment's excess return by its Ulcer Index. A lower Ulcer Index therefore lifts the ratio, rewarding strategies that deliver returns without painful drawdowns.
Is my data kept private?
Yes. The calculation runs entirely in your browser. Nothing you enter is uploaded, stored, or shared with anyone.

About the author

Taha Kheirandish

Written and reviewed by

Taha Kheirandish

Economics student and independent researcher

Taha Kheirandish reads tax codes the way other people read maps — to find out where a system actually leads, not where it claims to go.

He is an economics student, and his work here is comparative by design. A pension deferral bonus in Quebec, a commuting allowance in Germany, a rent-increase ceiling in the Netherlands: each is a decision a government made about how money should move, and each reads differently once you set it beside eight others. He builds and checks these calculators across nine markets from primary sources — the regulation rather than a summary of it, the ministry’s own circular rather than a news item quoting it.

That is the editorial standard of the site as well as his habit. Every rate, threshold and bracket here carries the document it was read from and the date it takes effect, and gets re-checked when the law moves rather than when someone happens to notice.

He is a researcher, not a licensed adviser, and nothing on this site is personal financial advice. It is arithmetic done carefully with its sources shown — so that you can check it, and take it to someone who is.

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