What is downside deviation?

Downside deviation measures the volatility of returns that fall below a chosen target or minimum acceptable return (MAR). Unlike standard deviation, it only penalises negative or under-target outcomes.

What inputs do I need?

Provide a series of returns (or prices to derive returns), select simple or log returns, choose a frequency for annualisation (e.g., daily, weekly, monthly), and set a target/MAR (default 0%).

How is annualisation handled?

Downside deviation is scaled by the square root of periods per year (e.g., √252 for daily). Mean returns can be annualised arithmetically or geometrically depending on your selection.

What’s the difference between downside deviation and standard deviation?

Standard deviation treats upside and downside equally, whereas downside deviation considers only returns below the chosen target. This focuses the risk measure on harmful outcomes.

OPTIMLY Calculators | Downside Deviation

Investment data

Data type:

Add / remove rows

Performance settings

Target return / MAR (%)

Portfolio balance (£)

Calculator options

Data frequency:

Annualisation type:

Return type

Standard deviation estimator