SCAR is an acronym for "Simple-to-Compounded-Accelerated-Returns." The SCAR ratio is a snapshot of the compounding effect at its current acceleration level, good or bad, of the current (last 12 months) trade situation of an investment strategy. A SCAR ratio helps keep an investor or manager aware of the acceleration of the compounding effect at work in their trading methodology.

The ratio is always in relation to a 1% non-compounded market gain, therefore a SCAR ratio of 1.15 means that because of the trading history, (one year ago today to today) a 1% gain actually equals 1.15% in actual gains, when compared to the original principal.

A SCAR ratio of less than 1 (0.93 for example) means that the compounding acceleration effect of SCAR is negatively affecting future gains and or losses. A negative SCAR ratio would truly be a scar on a performance methodology and a sign that the tiger has begun to eat. As is the case with most analytics, if you don't test it you never know how a trading method is really performing and how much risk your principal is subjected to.
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