Unknown Indicator

Downside Deviation In A Nutshell

If you have not done so or need a refresher, it may benefit you to familiarize yourself with standard deviation, as that can work both to the upside and to the downside. However, downside deviation will only focus on the downside and with using standard deviation, it is focusing on both the upside and downside equally.

Starting with a simple definition, downside deviation measures downside risk. Beyond that, there is more that can help you to become more informed of your current investments or potential investments. This type of deviation will also work with your minimum return you are expecting.

Closer Look at Downside Deviation

So now that we know downside deviation only focuses on the downside, here are a few benefits to using it in your research. First, the fact that it does only focus on the downside is great because it will give you data that is only representative of the downside. Now, with that comes the assumption that there is enough negative data to give you a well calculated number. Secondly, this can help you find where you put in your stop losses and decide when you might get out of a position. Lastly, it is taking data that has already occurred, giving you an accurate representation of the past performances, limited to the downside.

Some of the disadvantages are that first, it does only focus on the downside risk. You want to ensure you have a good take profit level set as well, and that may be aided with standard deviation. Secondly, if there is not enough negative data, you may not get an accurate data point for the downside. Lastly, it does not take into account the current market conditions and fundamentals that can propel a stock lower. So it should be mentioned to not rely on this on its own.

Using deviations are great because they can give you accurate areas of where the market may turn and slow. Even better, downside deviation can take into account only the negatives, and give you levels to watch incase your equity falls. Be sure to test it in your current trading and investing situation because you may find that it does not complement your current situation. Always feel free to reach out to an investing community as this can be the best source of information, as people give you real time feedback that can give you an edge in your current investing and trading.

Use Investing Themes to Complement your positions

You can quickly originate your optimal portfoio using our predefined set of ideas and optimize them against your very unique investing style. A single investing idea is a collection of funds, stocks, ETFs, or cryptocurrencies that are programmatically selected from a pull of investment themes. After you determine your investment opportunity, you can then find an optimal portfolio that will maximize potential returns on the chosen idea or minimize its exposure to market volatility.

Did You Try This Idea?

Run Machinery Thematic Idea Now

Machinery
Machinery Theme
Fama and French investing themes focus on testing asset pricing under different economic assumptions. The Machinery theme has 61 constituents at this time.
You can either use a buy-and-hold strategy to lock in the entire theme or actively trade it to take advantage of the short-term price volatility of individual constituents. Macroaxis can help you discover thousands of investment opportunities in different asset classes. In addition, you can partner with us for reliable portfolio optimization as you plan to utilize Machinery Theme or any other thematic opportunities.
View All  Next Launch
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

Other Complementary Tools

Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Share Portfolio
Track or share privately all of your investments from the convenience of any device
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Stocks Directory
Find actively traded stocks across global markets
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Money Managers
Screen money managers from public funds and ETFs managed around the world
Equity Valuation
Check real value of public entities based on technical and fundamental data
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios