Volatility Drag
The gap between an asset's average return and its compound return, caused by volatility: a +10% day and a −10% day leave you at 99%, not 100%. Drag grows with volatility squared, which is why leveraged and inverse ETFs — volatility multiplied — bleed value in sideways markets even when their index goes nowhere.
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Related terms
Leveraged ETFA fund engineered to deliver a multiple (2x, 3x) of its index's daily …Inverse ETFA fund that delivers the opposite of its index's daily return (−1x, −2…VolatilityThe dispersion of an asset's returns, usually measured as the annualiz…
Backtests are hypothetical, computed by DeployQuant's engine on minute-resolution consolidated US market data (2021-01-04 to 2026-07-17, $10,000 starting capital, no margin, fees and slippage not modeled) and do not guarantee future results. Nothing on this page is investment advice. Live trading involves risk of loss.