Work out diversification score instantly with clear inputs, formula shown and shareable results.
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.
Effective holdings
N_eff = 1 / [ρ + (1-ρ)/N], scored alongside breadth, concentration and sector spread
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.
Most specific risk is removed by 20-30 well-spread names; beyond that you are mainly adding tracking cost.
With an average correlation of 0.55 even a hundred holdings behave like fewer than two independent bets.