Allocation
Risk per strategy
— per strategy
—
—
Money per strategy
—
Typical simultaneous loss (vol-adjusted)
—
True worst case (all lose at once)
—
Headroom vs budget
Combined worst case vs budget
—
0255075100%
Daily drawdown budget—
Safe risk you could use—
Worst-case multiplier—
Equal split · worst-case model. Correlation ρ scales the combined loss between √N (independent) and N (correlated). Educational — not financial advice.
How it works
Diversification frees daily-drawdown budget
Each strategy gets an equal slice of your daily drawdown budget (DD% ÷ N). Two figures matter. The typical simultaneous loss is vol-adjusted — it scales by √(N·(1+ρ·(N−1))) and represents the combined loss you should expect on a normal bad day, because real strategies rarely all bottom out together. The true worst case is the full budget (N × per-strategy risk): what you lose if every strategy takes its maximum hit at once, i.e. perfect correlation. Size against the typical figure for headroom, but never forget the tail is always the whole budget.
risk/strategy = DD% ÷ N · combined = risk × √(N·(1+ρ·(N−1)))
Related tools
Related guides
