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.
Other Indicators
All Technical Analysis
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 Entertainment Thematic Idea Now
Entertainment
View All Next | Launch |
Other Complementary Tools
Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Share Portfolio Track or share privately all of your investments from the convenience of any device | |
Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |