A measure of beta that reflects a stock‘s price movement during a downward trend. In this sense, it is a one-direction component of beta, as beta measures the volatility of a stock price in relation to the market as a whole (the dual beta). In calculation, downside beta is the product of downside correlation and the ratio of downside asset-specific volatility (stock volatility) to downside market-wide volatility.

Downside beta is the adjusted amount by which a stock (or broadly, a tradable asset) tends to decrease relative to the whole market (as measured by the performance of an index or benchmark). The adjusted, relative amount of change (downside volatility) is calculated only on days when the asset price exhibits a downward movement.

For a convertible, it is a measure of the convertible’s price sensitivity to changes (price falls) in the overall stock market (which does not include any dividend element).