How to calculate downside standard deviation?

Author: maximgl

Creation Date: 10/27/2019 10:44 PM

Wealth Lab » Technical Indicators » How to calculate downside standard deviation?

maximgl

10/27/2019 10:44 PM

Given that I have bars, how can I calculate only downside standard deviation, something similar to what is used in Sortino ratio?
Could it be implemented as a combination of existing Indicators or do I have to iterate through all bars to calculate it?

Eugene

10/28/2019 5:47 AM

Judging by this example of calculation of the downside deviation in Excel, I think you can achieve it by using a combination of existing indicators:

Downside Deviation as a Risk Measure

CODE:
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There's another formula but I leave it up to you to explore it:

Downside Deviation Calculation (5 Step Process)

Size:

Color:

Judging by this example of calculation of the downside deviation in Excel, I think you can achieve it by using a combination of existing indicators:

[link=https://investexcel.net/downside-deviation-excel/]Downside Deviation as a Risk Measure[/link]

[code]using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;

namespace WealthLab.Strategies
{
	//{=STDEV.P(IF(C10:C21<B4,C10:C21,""))}

public class MyStrategy : WealthScript
	{
		private StrategyParameter paramPeriod;
		private StrategyParameter paramMAR;
		private StrategyParameter paramFill;
		
		public MyStrategy()
		{
			paramMAR = CreateParameter("Target MAR", 0, 0, 7, 0.5);
			paramPeriod = CreateParameter("StdDev period", 10, 2, 100, 1);
			paramFill = CreateParameter("Fill empty periods?", 0, 0, 1, 1);
		}
		
		protected override void Execute()
		{
			int period = paramPeriod.ValueInt;
			double mar = paramMAR.Value;
			bool fillEmptyBars = paramFill.ValueInt == 1;
			var ret = ROC.Series(Close,1);
			var dsDev = new DataSeries(Bars,"Downside deviation");
			
			for(int bar = 0; bar < Bars.Count; bar++)
			{
				if (ret[bar] < mar)
				{
					dsDev[bar] = StdDev.Series(ret, period, StdDevCalculation.Sample)[bar];
					//Or maybe even like this if you wish:
					//dsDev[bar] = -StdDev.Series(ret, period, StdDevCalculation.Sample)[bar];
				}
				else
				{
					dsDev[bar] = !fillEmptyBars ? 0 : bar > 0 ? dsDev[bar-1] : 0;
				}
			}
			
			var p = CreatePane(30,false,false);
			PlotSeries(p, dsDev, Color.Red, LineStyle.Histogram, 2);
		}
	}
}[/code]

There's another formula but I leave it up to you to explore it:

[link=https://www.managedfuturesinvesting.com/a-better-measure-of-risk-standard-deviation-or-downside-deviation/]Downside Deviation Calculation (5 Step Process)[/link]

Wealth Lab » Technical Indicators » How to calculate downside standard deviation?