Downside Risk is an estimation of a security's potential loss in value if market conditions precipitate a decline in that security's price. Downside risk is also known as "risk-adjusted return," which takes into account the probability of losing money on an investment.A high downside risk can be unsettling for some investors, but it is important to remember that all investments involve some level of risk. By understanding the nature of the risks involved, investors can make more informed decisions about where to put their money.There are several factors that contribute to a security's downside risk, including its volatility and correlation with other securities. Investors should carefully consider these factors before making any investment decision.While no investment is without some level of downside risk, there are certainly ways to minimize those risks. Diversification is one key strategy, as well as investing in companies with strong fundamentals and long-term track records.
