Portfolio Risk Calculator: Open Trade Scenarios

This portfolio risk calculator combines entered cash-risk amounts for open trades using an assumed correlation factor. It has no holdings lookup or price history, so it does not measure historical volatility (how widely returns vary) or a probability of loss. Zero entries can silently become preset risks, making empty positions unreliable. Treat the result as a formula-based scenario, not a worst-case loss limit.

Use cash risk, rather than position value

Position risk is the cash amount you are examining as a possible loss on that trade. It differs from the purchase value, premium paid or margin held by a broker. Use a consistent loss definition for every entry before comparing them.

For a simple cash-share plan, the distance between entry and planned stop multiplied by quantity gives a planned price-movement loss. A stop is not a promise about the actual execution price. CME’s position-sizing lesson treats stop distance and account risk budget as separate inputs to sizing.

The risk per trade calculator can help examine a separate trade budget. This portfolio form assumes you have already worked out each cash-risk amount; it does not derive those amounts from entries, stops or contracts.

Two kinds of portfolio risk: investor and trader

People who search for a portfolio risk calculator usually mean one of two different things. An investor means the risk of a long-term mix of holdings, such as how much is in shares, bonds and cash, and how much the whole mix tends to swing. A trader means the total cash that could be lost if every open trade hit its stop at about the same time.

This page is about the second meaning. You type in the cash you could lose on each of three trades, and the tool combines them with one assumed correlation. It does not read your holdings, look at prices or tell you how an investment mix has behaved in the past. If you want an allocation view, you need a tool that holds price history. This one is a quick check on how much total risk you have taken on today.

Portfolio heat: total open risk explained

Many traders call the total cash at risk across all open trades portfolio heat. If each trade has a stop, the heat is the sum of the planned losses at those stops, shown here as the Simple Risk Sum. Dividing it by your capital gives the heat as a percentage.

Some traders set a personal ceiling on heat, so that a bad day with several trades going wrong still leaves most of the account untouched. The Max Portfolio Risk (%) box is where you type your own ceiling. There is no official or safe number for it. It is a rule you choose, and it should be one you can follow when you are stressed. Writing the ceiling down before the session starts makes it harder to break.

• Heat counts the planned loss, so a trade with no stop has no honest heat figure. Decide the stop first.
• A stop is not a guaranteed exit. A gap or a fast market can fill you worse, so real losses can be larger than the planned amount.
• Heat falls when a stop is moved to break-even or in profit, and rises when you add to a position.

What the controls mean

Correlation describes how outcomes move together. This tool applies the same factor to every pair, even when real relationships differ. The field is marked for nonnegative assumptions; typing a negative value can still reach the calculation and produce misleading results. It cannot represent a detailed set of pair-by-pair relationships or prove that a hedge will offset another trade.

The capital field supplies a denominator, not available broker margin. If your capital changes, the percentage can change even when each entered trade risk is unchanged. Keep that basis consistent when comparing saved notes from different dates.

Correlation: when several trades are really one

Correlation describes how closely two things move together. Two trades that tend to win and lose on the same days behave like one bigger trade. In Indian markets this is common. A long Nifty 50 future and a long Bank Nifty future often move in the same direction, because large banks sit in both indices. Several bank stocks bought together are another example, as are an index call and a stock call on a heavy index member.

The Correlation Factor box takes one number and applies it to every pair of trades. A higher factor pushes the combined figure towards the plain sum. A lower factor makes the combined figure smaller than the sum. Because you type that number, a low factor can make the result look comfortable when the trades really are linked. When in doubt, test the full-correlation case as well, because on a sharp market move correlated trades can hit their stops together.

Events matter too. Budget day, an RBI policy decision, results and global shocks can hit many positions at once. Treat the Simple Risk Sum as the figure to plan around in a stress case, and the blended figure as an optimistic companion to it.

Zero and empty inputs need special care

The form can replace a zero cash risk with a positive preset. It can also replace zero correlation with a nonzero preset. As a result, entering zero to remove a position or model unrelated outcomes does not reliably do what the labels suggest.

Do not rely on Active Positions to verify your real open positions. It counts positive amounts after those substitutions, without checking any trading account. The worked example below uses positive entries in every slot so it avoids that particular problem.

Read the outputs as scenario arithmetic

• Simple Risk Sum adds the entered risk amounts. It keeps the possibility of all assumed losses occurring visible.
• Total Portfolio Risk is the tool’s square-root blend of those cash amounts and the shared correlation factor.
• Risk % of Capital divides that blended amount by Total Trading Capital.
• Diversification Benefit subtracts the blended amount from Simple Risk Sum. It is a model difference, not cash already protected.
• Available Risk Capacity subtracts the blended amount from your chosen percentage allowance.
• Risk Status and Recommendation apply preset comparisons to that result. They do not assess suitability or actual margin.

The familiar square-root structure does not by itself turn planned stop losses into measured statistical risk. The form has no return distribution, observation period or confidence level. It therefore cannot establish the likelihood of losing a particular amount, and it cannot rule out simultaneous losses.

Standard measures: volatility, beta and Value at Risk

The tool does not compute the measures below, but you will meet them in other portfolio risk calculators, so it helps to know what they say.

• Volatility (standard deviation of returns) shows how widely returns have varied over a chosen period. A higher number means bigger swings, not a worse or better outcome.
• Beta compares how much a stock has moved against a market index. A beta above 1 means it has tended to move more than the index, and below 1 means less. It is a past-data measure. See the beta glossary entry.
• Correlation runs from -1 to +1. Plus one means two things moved together, zero means no link, and minus one means they moved opposite. See the correlation entry.
• Value at Risk (VaR) estimates a loss level that should not be passed on most days, for a stated period and confidence level. It says little about the days when it is passed, and it depends on the history used.

All four need a series of past prices. A cash-risk calculator like this one needs none, because you supply the loss amounts yourself. That makes it simple, and it also means the answer is only as good as your stop-based figures.

Worked example: assume every trade moves together

Use this made-up scenario: Total Trading Capital ₹1,00,000; Position 1 Risk ₹2,000; Position 2 Risk ₹2,000; Position 3 Risk ₹2,000; Correlation Factor 1; Max Portfolio Risk 8%. No actual trader, position or measured correlation is represented.

• Simple Risk Sum is ₹2,000 + ₹2,000 + ₹2,000 = ₹6,000.
• With correlation set to 1, meaning the assumed outcomes move fully together, the formula gives the same ₹6,000 total.
• Risk % of Capital is 6,000 ÷ 1,00,000 × 100 = 6%.
• Diversification Benefit is 6,000 − 6,000 = ₹0.
• Your illustrative allowance is 1,00,000 × 8 ÷ 100 = ₹8,000.
• Available Risk Capacity is 8,000 − 6,000 = ₹2,000, with 3 Active Positions.

The example illustrates the limiting case where the blended amount equals the simple sum. The remaining-capacity figure only compares arithmetic with the chosen allowance. It does not mean another trade is appropriate or that an additional cash-risk amount fits safely once relationships change.

How to calculate portfolio risk: simple sum and correlation-adjusted

Step one is the plain sum of planned losses. Step two is the combined figure, which sits between a lower value (when trades are assumed unrelated) and the plain sum (when they are assumed fully linked). For an example, take three trades with planned losses of ₹3,000, ₹2,000 and ₹1,000 and capital of ₹2,00,000. All numbers here are made up.

The gap between ₹6,000 and about ₹3,742 is the model's diversification effect. It only holds if the trades are truly unrelated, which is rarely the case for several index or bank positions. This is why many traders look at the plain sum first.

Correlated F&O example: Nifty and Bank Nifty longs together

Suppose you are long one Nifty 50 position and one Bank Nifty position, each with a planned loss of ₹4,000. Both are long, and both indices are led by the same large banks. Treat them as close to one trade. The honest total is about ₹8,000, which is the full sum, and not a smaller figure. If you also hold a bank stock, the picture is the same. The numbers are illustrative only.

A lower blended figure does not cap loss

When the correlation assumption is reduced from full co-movement, the tool may report a gap between Simple Risk Sum and Total Portfolio Risk. Both figures still come from assumptions. The difference is not a settlement credit, guaranteed protection or cash recovered from a loss.

Keep a separate scenario for simultaneous losses and for losses beyond planned stops. Positions can share a market, sector or event exposure even when their names differ. The tool does not inspect any of those connections.

Investor.gov describes diversification as spreading investments across and within asset classes. It also cautions that narrowly focused funds may overlap. That broader portfolio review requires information absent from this three-slot trade-risk form. See stock portfolio diversification for related concepts.

Changing portfolio risk: what to adjust first

If the total is above your own ceiling, you can bring it down in a few ways. Start with the one that fits your plan.

• Reduce the size of the largest planned loss first. Smaller quantity means smaller loss at the same stop.
• Close or skip the trade that is most linked to another. Two trades with the same driver count nearly twice.
• Place the stop where the trade idea is wrong, then size to that distance instead of moving the stop closer to fit the risk number.
• Cap the number of open trades. The three slots in this tool mirror a simple limit of that kind.

For sizing each trade before you enter it, the guide on how to calculate position size works from a cash limit. The risk management rules page lists other limits traders set.

F&O positions, margin and total risk

Margin is the money your broker blocks to hold a futures or options position. It is not the same as the loss you could face. A trade can block a large margin and have a small planned loss, or the other way round. This tool takes the planned loss only. Keep a separate eye on margin, because a fall in account balance can force positions to close before your stop is reached.

Option buyers can lose at most the premium paid, so their planned loss is limited by that amount. Sellers and futures traders have no such cap, so for them the stop is the only limit on the loss, and gaps can pass it.

Limits, rounding and recommendations

Currency cards round to whole rupees, while percentage cards retain more detail. The status comparison uses the underlying calculation, so a rounded display near a boundary can obscure which side of the limit it falls on.

At an exact chosen limit, Recommendation can say the portfolio exceeds the limit even though the calculated capacity is zero. More generally, its invitation to add positions is a preset response to positive capacity. It has not considered whether the risk inputs are complete or reliable.

Use the maximum drawdown calculator to examine an observed decline separately, or the risk of ruin calculator for a modelled sequence with its own assumptions. Neither measure is interchangeable with this cash-risk blend.

Questions about portfolio risk

Sources

• CME Group: position size, stops and cash risk, checked 16 Oct 2026.
• Investor.gov: diversification and overlapping holdings, checked 16 Oct 2026.