Indicates a measured high volatility in investment strategy actually also a high risk? The downside deviation offers a different perspective and is therefore a valuable addition to strategy reviews for investment professionals not an easy undertaking are, above all, because you can look hard in the minds of the traders responsible and usually receives even no insight into the algorithms of trading systems. Well, if you, the case, the trade development after all can follow live like in a managed account and from a relatively safe assessment of opportunity and risk of an investment strategy can reach over a certain period of time. Therefore, it makes sense to equip various interesting strategies with the minimum account size, to monitor the trading closely and to supplement such strategies, where the risk reward profile for individual needs appears acceptable. Comprehensive information is useful in the pre-selection of strategies and include also the risk figures traded history. "On the basis of simple indicators of volatility" and downside deviation"shows that the generally much better-known indicator of volatility" supplies not necessarily also the better approach of risk.
The volatility is the standard deviation of the changes in an investment. It takes into account price swings in both"directions. This means that high positive results exactly affect the volatility as high negative results. The pronouncement the higher volatility, is the greater also the risk the investor is"is therefore limited. Hardly an investor as a risk will feel positive deviations. These are eventually required and contribute to the profit of the investments. Because they however equally be taken into account in calculating the volatility as negative deviations, strong positive fluctuations contribute their part to the volatility.
Sole consideration of the volatility may be reason for a wrong assessment an investment guide. See more detailed opinions by reading what Ben Horowitz offers on the topic.. The downside deviation provides already somewhat clearer views of the exposure in the trade history. The formula for the calculation of this indicator is closely parallel to the calculation of volatility.