What is 'Downside Deviation'
Downside deviation is a measure of downside risk that focuses on returns that fall below a minimum threshold or minimum acceptable return (MAR). It is used in the calculation of a risk measure known as the Sortino Ratio.
BREAKING DOWN 'Downside Deviation'
Standard deviation, the most widely used measure of investment risk, has some limitations, such as the fact that it treats all deviations from the average  whether positive or negative  as the same. However, investors are generally more concerned with negative divergences than positive ones, i.e. downside risk is a bigger concern. Downside deviation resolves this issue by focusing only on downside risk.
Another advantage over standard deviation is that downside deviation can also be tailored to the specific objectives and risk profile of different investors who have various levels of minimum acceptable return.

Downside Risk
An estimation of a security's potential to suffer a decline in ... 
Sortino Ratio
A modification of the Sharpe ratio that differentiates harmful ... 
Residual Standard Deviation
A statistical term used to describe the standard deviation of ... 
Standard Deviation
1. A measure of the dispersion of a set of data from its mean. ... 
Empirical Rule
A statistical rule stating that for a normal distribution, almost ... 
Risk
The chance that an investment's actual return will be different ...

Investing
Mitigating Downside With The Sortino Ratio
Differentiate between good and bad volatility with the Sortino Ratio. 
Investing
What is the Sortino Ratio?
By using the Sortino ratio, an investor can focus on the rate of return needed to reach a specific financial goal, such as saving for vacation or making a down payment on a home. It looks at ... 
Investing
The Uses And Limits Of Volatility
Check out how the assumptions of theoretical risk models compare to actual market performance. 
Investing
5 Ways To Rate Your Portfolio Manager
Investopedia explains: These five performance ratios will help you measure how good your money manager is at increasing the value of your portfolio. 
Investing
Explaining the Empirical Rule
The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution. 
Investing
3 Ways To Evaluate the Performance of Alternatives
Learn about three ways to measure the performance of alternative investments. See how the commonly used Sharpe ratio has drawbacks in measuring volatility. 
Investing
A Simplified Approach To Calculating Volatility
Though most investors use standard deviation to determine volatility, there's an easier and more accurate way of doing it. 
Investing
Understanding The Sharpe Ratio
This simple ratio will tell you how much that extra return is really worth. 
Investing
5 Ways To Measure Mutual Fund Risk
These statistical measurements highlight how to mitigate risk and increase rewards. 
Trading
Improve Your Investing With Excel
Excel is a useful tool to assist with investment organization and evaluation. Find out how to use it.

What does standard deviation measure in a portfolio?
Dig deeper into the investment uses of, and mathematical principles behind, standard deviation as a measurement of portfolio ... Read Answer >> 
What is the difference between standard deviation and average deviation?
Understand the basics of standard deviation and average deviation, including how each is calculated and why standard deviation ... Read Answer >> 
How is risk aversion measured in Modern Portfolio Theory (MPT)?
Find out how risk aversion is measured in modern portfolio theory (MPT), how it is reflected in the market and how MPT treats ... Read Answer >> 
How is standard deviation used to determine risk?
Understand the basics of calculation and interpretation of standard deviation and how it is used to measure risk in the investment ... Read Answer >> 
What is standard deviation used for in mutual funds?
See how standard deviation is helpful in evaluating a mutual fund's performance. Use it in combination with other measurements ... Read Answer >> 
What is the difference between the expected return and the standard deviation of ...
Learn about the expected return and standard deviation and the difference between the expected return and standard deviation ... Read Answer >>