actual rate of return

That action would drive down the actual rate of return achieved, until it reached the rate of return the market deems commensurate with the level of risk.

The actual rate of return on a futures position depends both on whether the position is long or short, and on the amount of margin that has to be paid.

Thus, the ratio is the actual rate of return in excess of the investor's target rate of return, per unit of downside risk; or, overperformance divided by root-mean-square underperformance.

However, this is not the case because intermediate cash flows are almost never reinvested at the project's IRR; and, therefore, the actual rate of return is almost certainly going to be lower.