Underwater curve
InvestingDefinition
Visual representation of how often and how deeply a strategy is in drawdown. Time spent underwater (below previous peak) is a critical risk metric. The S&P 500 has been "underwater" roughly 25% of all months since 1928.
Strategies with similar volatility can have wildly different underwater profiles — the difference is whether drawdowns are deep but rare or shallow but frequent.
Strategies with similar volatility can have wildly different underwater profiles — the difference is whether drawdowns are deep but rare or shallow but frequent.