DEFINITION of 'Spread To Worst'

The difference in overall returns between two different classes of securities, or returns from the same class, but different representative securities. The spread to worst measures the difference from the worst performing security to the best, and can be seen as a measure of dispersion of returns within a given market or between markets. The spread to worst can vary significantly depending on different market and economic variables.

Calculated as:

Spread To Worst

BREAKING DOWN 'Spread To Worst'

Some of the market and economic variables that affect the spread to worst may include investor confidence, short and long-term interest rates, amount of disposable household income and the age of the investor. A relatively high spread to worst indicates a larger measure of return dispersion versus a relatively lower spread to worst, and can also indicate the potential direction of asset allocation.

For example, a high spread to worst of 50.5% between equities (say an expected return of 55%) and government bonds (say a 4.5% return) would indicate a possible continued short-term focus by investors in the equity markets.

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