What is the Upside-Downside Ratio?
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The Upside-Downside Ratio is calculated as (High Price - Present Price) divided by (Present Price - Low Price). It gives investors a sense of a stock's upside potential relative to its downside risk. A ratio of at least 3-to-1 is commonly recommended as a minimum for a new purchase. The Stock Analyzer can calculate this automatically.
Think about weighing a stock's potential gain against its possible loss. Many investors want at least 3-to-1 upside before buying.