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Diversification Calculator

Owning eight things is not the same as being diversified. This scores your real diversification from asset correlations and volatility - and shows, in a heatmap, exactly which of your holdings just move together.

Quick start:
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Sum: 100%
59/ 100
Good diversification
Your portfolio's volatility is 11.5% a year - 29% lower than the 16.3% you'd have with no diversification benefit. You hold 5 classes, but they act like 3.3 independent bets.
Portfolio volatility11.5%
Diversification ratio1.42×
Effective assets3.3
Largest holding45%
Correlation heatmap green = diversifying · red = moves together
US
Intl
BTC
Gold
Bond
US
1
.85
.25
.05
.10
Intl
.85
1
.25
.10
.10
BTC
.25
.25
1
.10
.00
Gold
.05
.10
.10
1
.20
Bond
.10
.10
.00
.20
1
Overlapping holdings (limited diversification between them)
US stocks ↔ Intl. stocks0.85 correlation

Uses approximate long-term historical volatility and correlations per asset class - a directional guide to your portfolio's structure, not a live risk model or financial advice. Correlations spike toward 1 in a crisis, when diversification helps least.

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Frequently asked

What does this diversification calculator actually measure?

It goes beyond counting how many things you own. Using each asset class's historical volatility and its correlation with the others, it computes your true portfolio volatility - σ = √(wᵀΣw) in portfolio theory - then compares it with the volatility you would have with no diversification benefit. The gap is your real diversification. It also shows your "effective number of assets", which is often far smaller than the number you actually hold.

Why can I own 8 assets but still be poorly diversified?

Because diversification comes from low correlation, not from count. If you hold US stocks, international stocks, emerging markets and REITs, you own four things - but they all crash together (correlations of 0.6-0.85), so they behave almost like one big equity bet. Real diversification means pairing assets that move differently, like stocks with gold or bonds. The heatmap above shows which of your holdings are redundant.

What is the "effective number of assets"?

It is 1 divided by the Herfindahl index of your weights - a concentration measure. If you hold five assets but 80% sits in one, your effective number is close to 1, meaning you really have one bet. A balanced five-asset portfolio approaches an effective number of 5. It captures concentration risk that a simple asset count hides.

Is a lower portfolio volatility always better?

Not on its own - cash has almost zero volatility but earns almost nothing after inflation. The goal is not minimum volatility; it is the most return per unit of risk. This tool helps you see whether the risk you are taking is diversified (spread across uncorrelated assets) or concentrated (piled into things that move together), so you can cut needless risk without sacrificing expected return.

Are the correlation and volatility numbers exact?

They are approximate long-term historical figures for each asset class, widely used as planning benchmarks - not a live calculation from your specific tickers. Correlations also drift over time and tend to spike toward 1 in a crisis, exactly when you most want diversification. Treat the output as a solid directional guide to your portfolio's structure, not a precise risk model.

Can Alvest analyze my real portfolio's diversification?

Yes. Alvest classifies your actual holdings, measures concentration and correlation, and flags overlapping positions - alongside crash stress tests and real, after-inflation returns. You can start free.