Journal / Explainer · 5 min read
UPI explained: the one number we rank every Keel by
What the Ulcer Performance Index measures, a worked illustration, how to read it, and where it can mislead.
By Lowdraft. Published October 20, 2026.
Two portfolios can both grow 12% a year and feel nothing alike. One drifts up with small dips. The other drops 25%, takes two years to recover, and then catches up. If you only look at annual return, they look the same. UPI is built to tell them apart.
What UPI is
UPI stands for Ulcer Performance Index. It divides a portfolio's return by its Ulcer Index, a measure of how deep and how long its drawdowns were. A drawdown is how far the portfolio sits below its previous high on a given day.
- Ulcer Index: take the drawdown (in percent) on every day, square each one, average them, and take the square root. Squaring means deep drops count far more than shallow ones, and a long stay under water counts every day it lasts.
- UPI: return divided by the Ulcer Index. Some versions subtract a risk-free rate from the return first. Higher is better.
An illustration
| Example portfolio | Annual return | Ulcer Index | UPI |
|---|---|---|---|
| A: steady, small dips | 12% | 3 | 4.0 |
| B: same return, deep slump | 12% | 9 | 1.3 |
Made-up numbers to show the idea. Not results from any Keel.
Same return, very different score. That gap is the reason UPI is our first ranking number.
Why not just use return, Sharpe or maximum drawdown?
- Return ignores the ride.
- Sharpe treats upward swings as risk. A portfolio with big up days is penalized for them.
- Maximum drawdown rests on one single event. Two portfolios with the same worst fall can differ a lot in how long they stayed down.
- UPI counts every day under water, and weights deep days more heavily.
We still show those numbers. After UPI we look at Sortino, maximum drawdown and annual return, always next to the S&P 500 over the same dates. A Keel on a rising trend ranks above one that is fading.
How to read a UPI
- It is only comparable over the same window. A UPI from a calm stretch will look far better than one from a year that includes a crash. Compare Keels, and your account, over identical dates.
- The scale depends on the measurement. In our tests, UPI values for our best Keels ran well above those of the S&P 500 over the same dates, which scored roughly 2. Do not compare our numbers with a figure quoted elsewhere unless you know the window, the costs and the formula.
- Short windows flatter it. One quiet year can produce a large UPI. We check one-year, three-year and full-history UPI together, and test on data held back from the design.
Where UPI can mislead
- It is backward-looking. A high UPI describes the past. It does not promise the future.
- It rewards low volatility strategies. A portfolio hidden in cash would score well on UPI while earning little, which is why we read it together with return.
- It can be tuned. Anyone who tries enough rule variations will find one with a great UPI by chance. We wrote about that in our indicator case study.
The takeaway
When you compare portfolios, ask not only "how much did it earn?" but "what did it put me through to earn it?" UPI is one way to put a number on the second question.
Five numbers to compare your advisor's results · The full glossary
Educational explainer with illustrative numbers. Not investment advice. Hypothetical results are prepared with hindsight. Past performance, real or simulated, does not predict future results. You can lose money.