Risk parity
Risk parity calculator equal risk, not equal dollars
Equal risk contributions, inverse volatility, hierarchical risk parity, and minimum variance. Four ways to stop the riskiest name from owning the book.
BTC / ETH / SOL
Risk budget, four ways
Equal risk uses the full covariance. Inverse vol ignores correlation. The gap between those two rows is the correlation adjustment.
- Equal risk
- BTC 40.4%
- Inverse vol
- BTC 40.8%
- Min variance
- BTC 100.0%
- HRP
- BTC 41.0%
Largest weight
Largest weight
Largest weight
Largest weight
| Method | BTC | ETH | SOL |
|---|---|---|---|
| Equal risk | 40.4% | 32.2% | 27.4% |
| Inverse vol | 40.8% | 32.2% | 27.0% |
| Min variance | 100.0% | 0.0% | 0.0% |
| HRP | 41.0% | 25.6% | 33.4% |
- 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.
Equal dollars is not equal risk
A 33/33/33 mix of Bitcoin, Ethereum, and a quieter name is mostly a Bitcoin bet, because Bitcoin and Ethereum move together and both jump more than a bond ETF. Risk parity assigns weight so each asset contributes the same variance.
Inverse volatility is the simple version: weight proportional to 1/vol, ignoring correlation. Minimum variance is the full covariance answer with no return target. Hierarchical risk parity clusters first so correlated names share one risk bucket.
How this page runs it
Thrive's portfolio engine estimates the empirical covariance from your returns. Equal risk contributions, minimum variance, and hierarchical risk parity use that matrix. Inverse volatility uses the volatilities on the diagonal.
None of these mixes use the sample mean. That is the point. They will not chase last month's winner.
How to run it
- Paste aligned closes.
- Compare equal-risk weights with inverse-vol weights. The gap is the correlation adjustment.
- Read minimum variance as the calmest long-only mix.
- Use hierarchical risk parity when you have names that cluster.
FAQ
People also ask
A portfolio where each asset contributes the same amount of variance. High-vol assets get less dollar weight. Low-vol assets get more, until their risk matches.
Inverse volatility only looks at each asset’s own vol. Risk parity also cuts weight when assets are highly correlated, because those names share one risk.
Lopez de Prado’s method. Cluster the covariance, allocate risk between clusters, then inside them. It avoids the unstable matrix inverse that blows up mean-variance weights.
No. Weights stay long only and fully invested. A Treasury ETF can get a large dollar weight. It will not be levered past 100%.
Related
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.
Diversification ratio calculator
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.
Efficient frontier calculator
Two or more close series. The engine estimates means and covariance, then lays out the mean-variance frontier: the mixes that take the least vol for each return.
Trading journal
The ratio on a pasted series is a lab result. The journal is the book you actually traded.
Position size calculator
Vol and drawdown tell you the path. Size tells you what you can hold.
Bitcoin volatility
The live 90-close vol print for the BTC sample.
Budget risk on the book you hold.
A target weight is a plan. Thrive shows the weight you actually carried and whether the risk budget survived the week.