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InvestHub.com's
Finance Dictionary and Glossary of Investment Terms

Risk Rank  

Definition 1.

A Value Line measure of a mutual fund''s volatility. Risk Ranks are calculated for each of two broad categories; equity and partial equity funds, and taxable and tax-exempt fixed-income funds. The ranks are based on standard deviation, a measure of a fund''s volatility. Value Line uses a three-year period for this calculation, which provides enough data for reliable measurement without overweighting data that is too old to be reliable. Standard deviation accounts for both positive and negative returns equally and thus gives an indication of the potential swings in a fund''s performance. Because it makes no distinction between upside and downside volatility, standard deviation will tend to give a more conservative indication of the risk a fund has historically incurred. A Risk Rank of ""1"" indicates the least volatile, or least risky, funds. Conversely, a Risk Rank of ""5"" indicates the most volatile, or the most risky, funds.
 
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