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Diversification Score Calculator

Work out diversification score instantly with clear inputs, formula shown and shareable results.

About Diversification Score Calculator

Counting holdings overstates diversification when they move together. Scoring breadth, concentration, sector spread and average correlation gives a fuller picture, and the effective number of independent holdings shows how much genuine diversification the correlation allows.

Formula

Effective holdings

N_eff = 1 / [ρ + (1-ρ)/N], scored alongside breadth, concentration and sector spread

Worked example

With the default values below, Diversification Score Calculator returns Diversification Score Out Of 100 of 68.1. Change any input above and every figure here is recalculated in your browser.

Inputs used

Number Of Holdingsaccepts 1–500
18
Largest Position Weightaccepts 0.1–100 %
14 %
Number Of Sectors Representedaccepts 1–30
6
Average Correlation Between Holdingsaccepts -1–1
0.55

Results

Diversification Score Out Of 100
68.1
Effective Number Of Independent Holdings
1.74
Points Lost To Concentration
6.4
Assessment
Reasonably diversified

Step by step

  1. 1Values used
  2. 2Effective holdings
  3. 3Diversification Score Out Of 100= 68.1
  4. 4Effective Number Of Independent Holdings= 1.74
  5. 5Points Lost To Concentration= 6.4
  6. 6Assessment= Reasonably diversified

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.

Frequently Asked Questions

How many holdings are enough?

Most specific risk is removed by 20-30 well-spread names; beyond that you are mainly adding tracking cost.

Why does correlation cap the benefit?

With an average correlation of 0.55 even a hundred holdings behave like fewer than two independent bets.

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