Portfolio Diversification
Calculator
Enter your investment holdings to measure portfolio concentration risk. Get an instant diversification score based on the Herfindahl-Hirschman Index (HHI) and see how balanced your portfolio allocation really is.
Enter Your Holdings
Add your tickers or asset names with their current market values.
Why Portfolio Diversification Matters
Reduce Risk
Spreading investments across multiple holdings reduces the impact of any single asset declining.
Smoother Returns
Diversified portfolios tend to experience less volatility and more consistent long-term growth.
Better Decisions
Understanding your portfolio concentration helps you make informed allocation decisions.
How It Works
Our calculator uses the Herfindahl-Hirschman Index (HHI) to measure portfolio concentration.
Enter Holdings
Add your tickers or asset names along with their current market values.
Calculate Weights
We compute each holding's percentage weight in your total portfolio.
Compute HHI Score
The Herfindahl-Hirschman Index measures concentration by summing the squares of each weight.
Get Your Rating
Your diversification score (0-100) tells you how well spread your investments are.
Frequently Asked Questions
What is the Herfindahl-Hirschman Index (HHI)?
The HHI is a measure of market concentration calculated by summing the squares of each holding's percentage share. An HHI close to 0 indicates high diversification, while an HHI of 1.0 means complete concentration in a single asset.
What is a good diversification score?
A score of 80 or above is generally considered well-diversified. Scores between 60-80 suggest moderate diversification, while scores below 40 indicate high concentration risk. The ideal score depends on your investment strategy and risk tolerance.
How many holdings should I have in my portfolio?
Research suggests that 15-30 well-chosen holdings across different sectors and asset classes can provide substantial diversification benefits. However, over-diversification can dilute returns. The key is balanced allocation rather than simply adding more positions.
Does diversification guarantee against losses?
No, diversification does not guarantee against losses. It is a risk management strategy that aims to reduce the impact of poor performance by any single investment. During broad market downturns, even diversified portfolios may decline in value.
What is concentration risk?
Concentration risk occurs when a large portion of your portfolio is invested in a single stock, sector, or asset class. If that investment performs poorly, it can have an outsized negative impact on your entire portfolio.
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