Semivariance

What Is a Semivariance?

Semivariance is a measurement of data that can be utilized to estimate the potential downside risk of an investment portfolio. Semivariance is calculated by measuring the dispersion of all perceptions that fall below the mean or target value of a set of data. Semivariance is an average of the squared deviations of values that are not exactly the mean.

Grasping Semivariance

The Formula for Semivariance Is

$\begin &\text=\frac1n\times\sum^n_{r_t<\text}(\text-r_t)^2\ &\textbf\ &n = \text\ &r_t = \text\ &\text = \text \end$

What Does Semivariance Tell You?

Semivariance is like variance, however it just considers perceptions that are below the mean. Semivariance is a helpful device in portfolio or asset analysis since it gives a measure to downside risk.

While standard deviation and variance give measures of volatility, semivariance just ganders at the negative changes of an asset. Semivariance can be utilized to work out the average loss that a portfolio could cause since it kills all values over the mean, or over a financial backer's target return.

For risk-averse investors, deciding optimal portfolio allocations by limiting semivariance could reduce the probability of a large decline in the portfolio's value.

Compute With a Spreadsheet

To utilize a bookkeeping sheet program to work out semivariance:

• Make a column — for instance, column A — that comprises of all returns in the portfolio.
• Eliminate all returns over the mean from column A.
• In column B, deduct the returns staying in column A from the mean.
• In column C, square the difference, track down the sum, and separation the sum by the number of returns that fall below the mean.

Various bookkeeping sheets might have different usefulness and some have more straightforward ways or alternate routes to do this calculation.

Features

• The semivariance formula can be utilized to measure a portfolio's downside risk.
• Semivariance just considers perceptions that are below the mean of a data set.
• Bookkeeping sheet programs can be helpful in computing semivariance for your portfolio.