Correlation matrix calculator
Up to four markets at once.
Free risk tools
Risk parity calculator
Equal money is not equal risk. The weights that give each market the same share of the portfolio's swing, correlations counted.
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The markets
The weights
For an equal share of the risk from each, put A 15%, B 13%, C 9%, D 63% of the money.
- Equal money
- Equal money in each leaves C with 52% of the risk, against the 25% a fair share would be: the calm markets barely count.
- By volatility
- Sizing by volatility alone, ignoring how the markets move together, comes out to 32 points off a fair share for one market, because the links between them shift the risk.
- The whole swing
- Portfolio swing a year: 5.0% at equal money, 3.0% by volatility, 2.2% at equal risk. Equal risk is about balance, not a lower swing: raise or lower the whole size to reach the swing you want.
- Read it with care
- A share below zero means that market cuts the swing: it has moved against the others. Measured on 79 bar-to-bar moves. Volatility and links change, and in a sell-off links tend to rise together, so weigh again when they move. Equal risk says nothing about which market will pay.
Each market's swing a year, its share of the risk at equal money, the weight by volatility alone and the weight for equal risk, and that weight in money out of 10,000.
| Market | Swing a year | Risk at equal money | By volatility | Equal risk | Money |
|---|---|---|---|---|---|
| A | 8.2% | 34% | 18.3% | 14.8% | 1,483 |
| B | 7.3% | 21% | 20.5% | 13.1% | 1,305 |
| C | 11.4% | 52% | 13.1% | 8.7% | 867 |
| D | 3.1% | -7% | 48.0% | 63.4% | 6,345 |
Education only, not investment advice. The answer comes from the numbers you typed in, not from your account or the market. Simulated results are hypothetical and have limits: real trading has slippage, gaps, changing results and emotions. Trading leveraged products can lose money quickly, including all of it. Risk warning
Educational only, not financial advice; trading involves risk.
Why equal money is not equal risk
Split money evenly between gold, a currency pair and a stock index, and the wildest of them decides most of what the account does. Risk parity sizes each market so each adds the same share of the swing, counting how they move together. Sizing by volatility alone gets close when the markets are loosely linked; the equal-risk weights also count the links.
See how the markets move together with the correlation matrix, size one market to a target swing with the volatility target calculator, and check the whole portfolio's risk with the portfolio risk calculator.
Not advice. Arithmetic on the prices you type; past swings and links do not promise future ones.
Next tools
Volatility target calculator
Size a position by the swing you want on the account.
Portfolio risk calculator
How much a mix of holdings swings.
Pricing
Three ways in. Pick yours.
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Baroq never holds your money and never trades for you. Educational only, not financial advice; trading involves risk.