"No Algorithm should be designed that way."
Without knowing the algorithm and its purpose, you have no claim on here.
"What you are saying is that I performed better in past all challenges so I should've performed better in the next one too, and thats why the rating fell."
"But, the person who is higher in overall ratings must have done poorly somewhere to get lower individual ratings?"
Or perhaps he didnt participate in that type of contest.
Look, take it this way. Overall rating is changed at every rated contest you participate in. In a month, assuming you give 100% participation, it changes 3 times. After every time, it gets fresh statistics like volatility, expected rank etc. In this way, its more “recent” or “updated”.
But contest specific ratings change only once a month, and your overall rating changes twice (100% participation) before that contest is held again. So in a way, this is a bit more “outdated” and more dependent on how you were back then rather than how you are now.
And this ought to answer why there are variations in overall rating and rating per contest.
Ultimately the difference is a result of frequency of changes and differences in statistics- since contest specific ratings are only concerned with how you do in one type of contest.
"Could you provide a simple illustration or example."
For something as complex as this, for which even I didnt go into those minute details, I cant. Sorry for that.