Correlated Portfolio Diversification Score
Enter the number of holdings in your portfolio, the estimated average correlation between them, and how concentrated your largest sector is. We'll compute a diversification score from 0-100 along with the effective number of independent bets.
About this calculator
Estimate a portfolio diversification score based on the number of holdings, average pairwise correlation, and sector concentration to gauge concentration risk.
Frequently Asked Questions
What is 'effective number of holdings'?
It's a statistical measure of how many truly independent bets your portfolio represents, adjusted for correlation between holdings. Highly correlated holdings behave like fewer independent positions.
What counts as a good diversification score?
Scores above 70 generally indicate a well-diversified portfolio across positions, correlations, and sectors. Scores below 40 suggest meaningful concentration risk.
How do I estimate average correlation?
You can approximate this using historical correlation data between your major holdings, or use a conservative estimate like 0.3-0.5 for a typical diversified equity portfolio.