# Downside Deviation

*Risk & Portfolio — Finicade finance glossary*

Downside deviation measures only the variation below a chosen threshold, ignoring upside swings entirely. It answers the objection that standard deviation punishes a manager for making unexpectedly large gains. It's the denominator of the Sortino ratio, and it separates two portfolios that look identical on volatility but differ completely in shape — one that drifts up and crashes, and one that grinds steadily.

**Also known as:** downside risk, semi-deviation

**Related terms:** [Sortino Ratio](https://finicade.com/glossary/sortino-ratio), [Standard Deviation](https://finicade.com/glossary/standard-deviation), [Drawdown](https://finicade.com/glossary/drawdown), [Volatility](https://finicade.com/glossary/volatility), [Skewness](https://finicade.com/glossary/skewness)

Source: https://finicade.com/glossary/downside-deviation