Simple summed risk · entered values
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Sum of the verified monetary amounts you entered. It excludes gaps beyond stops, slippage, fees, financing and execution failure.
Portfolio Correlation Risk Calculator
Add each position’s verified monetary risk amount in your account currency, then compare the simple sum with a historical correlation-adjusted descriptive dispersion estimate. Model portfolio_correlation_risk v1.0.0 uses the certified Pearson inputs and fails closed when any coefficient is unavailable.
Key Takeaways
- The tool accepts a verified monetary risk amount; it does not infer pip value, contract size, price conversion, slippage or gap loss.
- The simple sum is deterministic from your entries. The second figure is a backward-looking model estimate, not expected loss, VaR or stop-loss probability.
- Daily simple returns are aligned by exact intervals and every coefficient requires at least 10 observations.
- If pairwise coefficients do not form a positive-semidefinite matrix, negative eigenvalues are clipped and the matrix is renormalized before calculation.
- No diversification score, risk band, hedge claim or trade recommendation is produced.
Risk-input workspace
Use the monetary loss at the planned stop already shown or independently verified in your account currency. The calculator deliberately does not derive that amount from lots, pips or an assumed contract.
Loading governed reference dataNo correlation-adjusted value is shown until the source and model gates pass.
Used only as the denominator for percentages.
Formatting only; no currency conversion occurs.
Actual aligned observation counts are shown below.
Correlation-adjusted dispersion · estimated
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Square root of the signed risk quadratic form after PSD handling. A lower value does not prove a safer portfolio or an effective hedge.
Portfolio positions
0| Pair | Direction | Risk amount | Action |
|---|---|---|---|
| No positions added. | |||
Position coefficient inputs
Each cell shows the historical Pearson coefficient used before any disclosed PSD correction. Hover a cell to inspect its sample status.
Add positions to inspect the exact pairwise coefficient inputs.
You remain responsible for confirming each stop-risk amount from instrument-aware broker or platform data.
Daily ECB reference returns are descriptive and may not represent intraday broker prices or future relationships.
No diversification score, safe-risk band, warning threshold, what-if recommendation or hedge instruction is generated.
How model 1.0.0 works
The simple figure adds the verified monetary risk amounts you enter and divides that sum by the account balance or equity input. The correlation-adjusted figure assigns +1 to long positions and −1 to short positions, forms a signed monetary-risk vector, and calculates the square root of wᵀCw, where C is the historical Pearson correlation matrix.
The coefficients come from correlation_pearson v1.0.0: daily simple returns derived from ECB reference observations, aligned by exact start and end intervals with pairwise deletion and a minimum sample of 10. A selected lookback is a calendar window, not a trading-session count.
Why the matrix may need PSD correction
Pairwise correlations can use slightly different aligned samples. The combined matrix can therefore be mathematically inconsistent even when every individual coefficient is valid. Model 1.0.0 applies an eigenvalue-clipping projection: negative eigenvalues are clipped to zero, the matrix is reconstructed, and each entry is renormalized to a unit diagonal. The interface states when this changes the matrix and reports the largest coefficient adjustment.
What this output cannot tell you
The dispersion figure is not expected loss, value at risk, drawdown, margin use, liquidation probability, stop-loss probability or hedge effectiveness. It does not model non-linear dependence, correlation instability, gaps, slippage, fees, broker execution, different holding horizons or the probability that planned stops are hit together. It is an estimated descriptive scale, not a safe-risk threshold or trade recommendation.
Evidence guide
Portfolio correlation-risk methodology
The simple amount is the sum of entered loss-at-stop amounts. The descriptive correlation scale signs those amounts by direction and calculates √(wᵀCw) from the historical Pearson matrix. Percentages divide each amount by the entered account balance or equity.
If pairwise samples produce a non-positive-semidefinite matrix, the page applies the disclosed eigenvalue-clipping projection before calculating the combined scale.
Worked example
In the audited uncorrelated fixture, a 20,000 account has two long positions with 100 of verified stop risk each and a correlation coefficient of 0. The simple risk sum is 200 = 1.00% of the account.
The dispersion scale is √(100² + 100²) = 141.42, or approximately 0.7071% of the account.
How to interpret the result
The 141.42 figure is lower than the 200 simple sum because this fixture assumes zero linear correlation. It is not a 141.42 expected loss, maximum loss, value-at-risk estimate or probability that both stops will be hit.
Assumptions and limits
- Each monetary input must already be an instrument-aware stop-loss amount in the same account currency.
- Historical daily correlation can change and does not capture nonlinear dependence, gaps or intraday behavior.
- Different stop horizons and execution timing are not synchronized by the model.
- Margin, liquidation, spread, commission, swap, slippage and broker execution are excluded.
Sources and methodology
- NIST — correlation coefficient formula Primary reference for Pearson correlation.
- NIST/SEMATECH e-Handbook of Statistical Methods Statistical-methodology reference.
- CFTC — retail forex advisory Official leveraged-forex risk context.
Frequently Asked Questions
Use an instrument-aware loss-at-stop figure from your broker or platform, or independently calculate it with the correct contract specification and current account-currency conversion. Enter that monetary amount here; this page does not calculate it from lots or pips.
Every entered position amount must already use the same account currency. The selector controls number formatting only, avoiding an unsupported assumption about contract size or conversion rates.
It is the square root of a signed monetary-risk quadratic form using backward-looking daily-return correlations. It describes a model scale under those inputs; it is not expected loss, VaR, a forecast or a probability.
Yes. Direction and historical association can create offsetting terms in the quadratic form. That result does not prove the positions will offset in live trading or that a hedge is effective.
The correlation-adjusted result is withheld. A missing or undefined coefficient is never silently replaced with zero. The simple sum remains available because it uses only your entered monetary amounts.
No. It does not access broker credentials, positions, orders or balances. Version 1 inputs are stored only in your browser under a new schema and can be cleared from the page.
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Disclaimer: The results from this tool are estimates for educational and informational purposes only and may differ from your broker's figures. This is not financial or investment advice. Trading forex and CFDs carries a high level of risk and can result in the loss of all your capital. Always verify calculations with your broker and trade within your risk tolerance.