A drawdown refers to how much an asset is down from the peak before it recovers back to the peak. Drawdowns are a measure of downside volatility.
The time it takes to recover a drawdown should also be considered when assessing drawdowns. An asset that goes through too many big dropdowns is a very volatile asset and may not be a good investment option. Drawdowns can also be used to evaluate the strength of an asset during major market crashes. Generally, all assets are affected by market crashes but the ones that are relatively less impacted are generally good assets for the next stage of the uptrend.
Worst drawdowns can help to evaluate the historic volatility and investment grade of an asset.
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