These ratios offer a relatively straightforward way to evaluate a fund's historical performance during rallies as well as corrections. When used in conjunction with other risk measures, upside/downside capture ratios can be a handy tool for monitoring a fund’s performance.
What should you look for in these ratios?
These ratios essentialy tell the investor how much the fund had risen when the markets rallied and how much it fell during corrections. A good fund will have a higher upside capture ratio, which means it should outperform the benchmark by a wider margin, and it should have a lower downside capture ratio, which means that the fund shouldn’t fall as much as its benchmark.