Vyreon LabsMarket Measurements

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Max Drawdown: Drawdown From 1-Year High, Downside Deviation, Worst Days

What maximum drawdown is, drawdown from the 1-year high, sessions since the high, downside deviation, and worst 1/5/21-session returns.

Reviewed · Sources at the end · How Vyreon measures
Vyreon's per-security reports are not live yet; this page describes what they will measure. Examples are illustrative.

A drawdown is how far a price has fallen from its previous high. Maximum drawdown is the largest such peak-to-trough decline within a period. Vyreon reports both over the last year, along with how long ago the high was, the downside deviation, and the worst 1-, 5- and 21-session returns.

What Is Max Drawdown?

At each session, drawdown = close ÷ the highest close so far − 1. Maximum drawdown is the most negative value reached in the window.

Illustrative example: a price rises from 100 to 120, falls to 90 and recovers to 108. The maximum drawdown is 90 ÷ 120 − 1 = −25%. The current drawdown is 108 ÷ 120 − 1 = −10%.

Maximum drawdown is the deepest decline from a high that the price went through inside the window, whether or not it later recovered.

Drawdown From The 1-Year High

The current drawdown is the latest close compared with the highest close of the last year. It is 0% when the price is at a 1-year closing high. Vyreon also counts the sessions since that high.

Downside Deviation

Downside deviation measures only the size of losing days:

Downside deviation = √(average of min(daily return, 0)²) × √252

Up days count as zero, and the average is taken over all sessions in the window. Unlike standard deviation, it does not treat large gains as risk. It is annualized like realized volatility.

Worst 1-, 5- And 21-Session Returns

These are the most negative returns over any 1, 5 or 21 consecutive sessions within the year, including overlapping windows.

How Vyreon Calculates It

Vyreon uses 253 daily closes (252 daily returns, about one year) adjusted for splits and dividends, so an ex-dividend drop is not counted as a loss. The high is the highest close, not the highest intraday price. Returns are simple returns. If fewer than 253 closes are available, the measures are shown as unavailable rather than computed on a shorter window.

What Drawdown Does Not Tell You

  • Past declines do not limit future ones; a larger drawdown can always come.
  • One year is a short window. A security near its 1-year high can still be far below an older peak.
  • Closing prices miss intraday lows, so intraday declines can be deeper.

Related: relative performance · realized volatility · beta and correlation · ATR

Sources

  • Frank A. Sortino and Robert van der Meer, "Downside Risk", Journal of Portfolio Management (1991): risk measured from losses only.
  • Harry M. Markowitz, Portfolio Selection: Efficient Diversification of Investments (1959): semivariance, a downside-only measure of variability.

Maximum drawdown and worst-period returns are descriptive statistics with no single originator.