---
title: "Conditional Drawdown at Risk"
description: "Conditional Drawdown at Risk is an allocation method that picks the weights whose worst stretches below a previous peak are, on average, the shallowest."
canonical_url: "https://fincanva.com/docs/strategies/conditional-drawdown-at-risk"
last_updated: "2026-09-24"
md_url: "https://fincanva.com/docs/strategies/conditional-drawdown-at-risk.md"
---

# Conditional Drawdown at Risk

Conditional Drawdown at Risk (CDaR) is an [allocation method](/docs/strategies/allocation-and-allocation-method) that chooses the weights whose worst stretches below a previous peak are, on average, as shallow as possible. Instead of looking at single bad days, it follows the portfolio's path through the whole window, measures how far below its running high it sits on each day, and minimises the average of the deepest of those under-water readings. The method picker labels it **"CDaR · Conditional drawdown"** and describes it as "Reduces the longest and deepest stretches below the peak".

**Also seen as:** CDaR, conditional drawdown, drawdown optimisation

## What does Conditional Drawdown at Risk minimise?

It minimises the average of the worst share of [drawdowns](/docs/analysis/max-drawdown) along the path — the same idea as [Minimum CVaR](/docs/strategies/minimum-cvar), applied to under-water depth instead of daily loss:

$$
\text{CDaR}_\alpha = \text{average of the worst } \alpha \text{ of } D_t,
\qquad
D_t = \max_{s \le t} V_s - V_t
$$

where: $V_t$ is the portfolio's value on day $t$, $D_t$ is how far it sits below its highest value so far, and $\alpha$ is the **Tail share**. In words: every day the portfolio spends under water contributes its depth, and the method pushes down the average of the deepest 5%.

Because a drawdown persists until the portfolio recovers, a mix that heals slowly racks up many deep readings, and one that bounces back within days racks up few — which is the difference variance cannot see.

## How does Fincanva handle it?

- Conditional Drawdown at Risk is offered at **both levels**: across the instruments of a strategy, and across the strategies of a [Combined](/docs/getting-started/strategy-in-a-combined).
- Its one setting is the **Tail share**, from 1% to 25% and 5% by default: the share of the path's days whose drawdown depth is averaged.
- It reads the [calculation window](/docs/strategies/calculation-window) (**In-sample**, 12 months by default) and does not read the **Risk estimation** choice.
- When the window times the tail share comes to less than one day, the average becomes the single deepest day, and the app shows the same "Too little data for this tail share" warning as Minimum CVaR, offering to lengthen the in-sample period or switch to [Entropic Value at Risk](/docs/strategies/entropic-value-at-risk).
- The drawdown path is measured on log returns, so its depths sit a hair away from the drawdowns of the compounded equity curve shown in the results.
- The picker marks it "slow to compute": each [rebalance](/docs/backtesting/rebalance) solves an optimisation over the whole path.

## Which plan includes Conditional Drawdown at Risk?

It depends on your plan, at each level where the method is offered.

**Inside a strategy**

Included from Ultimate upwards. See [what each plan includes](/docs/account-security/what-each-plan-includes).

**Inside a Combined**

Included from Ultimate upwards. See [what each plan includes](/docs/account-security/what-each-plan-includes).

## What does it look like in practice?

Two mixes have the same volatility over a 12-month window of about 252 days, and both suffer the same −10% drop at some point.

- **Mix A** recovers its peak within a week. Across the year it spends about 20 days under water, and only a handful of them deeper than −5%.
- **Mix B** takes three months to recover. It spends about 70 days under water, dozens of them deeper than −5%.

At a 5% tail share the method averages the deepest 252 × 5% ≈ 13 under-water readings. For A they include its short dip and some shallow ones; for B all 13 come from its long slump. B's average is far deeper, so Conditional Drawdown at Risk prefers A — while a variance-based method, seeing equal volatility, would call the two equal.

Fincanva is for education and illustration only. It is not personalised financial advice, and past or simulated results do not predict future ones. [Read the Terms Addendum](https://fincanva.com/terms/addendum#section-3)