Calculate growth and the largest drawdown
Annualized growth equals (last equity ÷ first equity)^(365 ÷ observed days) − 1. At each observation, track the largest equity value seen so far. Drawdown equals (running peak − current equity) ÷ running peak. Maximum drawdown is the largest of those fractions. Calmar equals annualized growth ÷ maximum drawdown. Values must be positive, the observation period must be positive, and at least two chronological observations are needed for a useful sample.
Trace a simple annual equity path
For hypothetical equity values of 100, 120, 90, and 135 over 365 days, total and annualized growth are both 35%. The largest observed decline is from 120 to 90, a 25% drawdown. The Calmar ratio is therefore 0.35 ÷ 0.25 = 1.40. The final value exceeds the earlier peak, but that recovery does not erase the maximum drawdown already observed in the series.
Interpret sampling and annualization limits
Maximum drawdown only reflects the equity points entered; sparse observations can miss deeper losses between them. Observed days means elapsed calendar time, not the number of rows. Annualizing a short period can produce unusually large growth rates that are not forecasts. If the series never declines from a prior peak, maximum drawdown is zero and the ratio is undefined. Negative annualized growth yields a negative ratio when a positive drawdown exists.