Drawdown refers to the decline in the value of an investment from its peak to its lowest point
before a new peak is achieved. It measures the downside risk or potential loss an investor
might experience during a specific period. Drawdown is commonly expressed as a percentage
and is an important indicator of volatility and investment risk.
For example, if your portfolio value peaks at PKR 100,000 and later falls to PKR 80,000,
the drawdown is 20%. This helps investors understand how much value their investment lost
during a downturn.
Why Drawdown Matters
Monitoring drawdown helps investors assess how resilient their portfolio is during
market corrections. A smaller drawdown means the investment is less volatile and
recovers faster from losses, while a larger drawdown indicates higher risk and
potential stress for the investor.
Drawdown Formula
Drawdown (%) =
Peak Value − Trough ValuePeak Value
× 100
Where:
Peak Value — The highest value of the investment before decline
Trough Value — The lowest value reached during the decline
Uses of the Drawdown Calculator
Measure portfolio risk and assess historical performance
Compare different investments based on volatility
Determine recovery requirements after a market fall
Improve risk management and investment decision-making
Use the Rallys Equities Drawdown Calculator to analyze the decline from
peak to trough in your investments, understand your portfolio’s resilience,
and manage risk more effectively.
