Diversification
Diversification ratio calculator does the mix help?
The diversification ratio of your weights, next to the most diversified portfolio. A ratio near 1 means the names are one bet. Higher means the mix is doing work.
BTC / ETH / SOL
Diversification ratio 1.05
Near 1. These names are behaving like one bet at your weights.
- Your mix
- 1.05
- Most diversified
- ETH 34.1%
- Assets
- 3
- Closes
- 90
Weighted vol over portfolio vol
Largest weight in the optimized mix
Long only
Sample covariance
| Mix | BTC | ETH | SOL |
|---|---|---|---|
| Yours | 33.4% | 33.3% | 33.3% |
| Most diversified | 32.0% | 34.1% | 33.9% |
- Each row is daily, 365 periods a year. Annualized figures use 365 periods.
- 90 closes in the series. Computed by Thrive's portfolio engine. Rounded to the digit shown.
Count names, then check the ratio
The diversification ratio is the weighted average of asset vols divided by the portfolio vol. If every name moves together, portfolio vol equals that average and the ratio is 1. Correlation is the only reason the ratio climbs.
The most diversified portfolio maximizes this ratio. It is a useful comparison when your equal-weight mix looks busy and still behaves like Bitcoin.
How this page runs it
Thrive's portfolio engine estimates the empirical covariance from the closes. Your weights, or an equal mix if you leave them blank, produce the diversification ratio and the most diversified weights.
Both numbers use the same covariance, so the gap between your mix and the optimized mix is a weight choice, not a data choice.
How to run it
- Paste aligned closes.
- Enter weights or leave them equal.
- A ratio under 1.1 on a crypto basket usually means one factor.
- Compare your weights with the most diversified weights before you add another coin.
FAQ
People also ask
Weighted average volatility divided by portfolio volatility. Choueifaty uses it as the thing a diversified portfolio should maximize. Higher is more diversification. 1 is none.
The assets are highly correlated, or one volatile name dominates the weights. Both show up in crypto baskets. The correlation matrix shows which case you are in.
It means more risk reduction versus holding the names one at a time. It says nothing about expected return. A high ratio in a book of dead assets is still a dead book.
Risk parity equalizes risk contributions. The diversification ratio looks at the gap between average vol and portfolio vol. They often agree. They are not the same objective.
Related
Risk parity calculator
Equal risk contributions, inverse volatility, hierarchical risk parity, and minimum variance. Four ways to stop the riskiest name from owning the book.
Correlation matrix calculator
Empirical correlation from your closes. The heatmap is the number in each cell, not a color standing in for one.
Crypto portfolio optimizer
Max Sharpe, minimum variance, most diversified, and hierarchical risk parity. Same closes, four weight vectors, so you can see which method is just chasing the last winner.
Trading journal
The ratio on a pasted series is a lab result. The journal is the book you actually traded.
Correlation matrix
The pairs that keep the ratio near 1.
Bitcoin volatility
The live 90-close vol print for the BTC sample.
Ethereum volatility
The live 90-close vol print for the ETH sample.
Solana volatility
The live 90-close vol print for the SOL sample.
BTC and ETH correlation
The pair inside this sample window.
Ten coins can still be one bet.
Thrive shows the positions together, so a basket that is secretly a single factor is obvious in the journal.