How to check whether your stocks are really diversified
Last updated · By StockDashes
StockDashes checks it two ways and turns them into a 0–100 diversification score: how concentrated your money is, and how closely your holdings’ daily returns have moved together over the past 250 trading days. Owning many tickers isn’t the same as being diversified. Two companies that rise and fall together count as one bet, and one position at a third of the portfolio outweighs the rest. So check both: how the money is spread, and whether the holdings really behave differently from each other.
How StockDashes shows it
Diversification on the score card — 20% of the 0–100 score
Half of it is concentration: how evenly your money is spread (the Herfindahl index — the sum of the squared weights, lower is more spread), with every point a single holding sits above 20% of the portfolio taking off 2 points. The other half is correlation: 100 minus 100 × the average correlation between every pair of holdings, from their daily returns over the last 250 trading days. Open Diversification on the score card to see each input: the Herfindahl index, the largest holding, the single-name penalty, the average pairwise correlation and the three most correlated pairs.
The Correlations page
It lists the five pairs that move most alike — Strongest correlations: these positions move together — and the five that move least alike — Lowest correlations: your real diversifiers — from aligned daily returns over about the past year. Each pair is labelled: very high from 0.7, moderate from 0.4, low from 0.1, none around zero, and inverse below −0.1.
Allocation by sector
The dashboard’s Allocation by sector card shows how your money is split across sectors, by the value of each holding.
In the score’s summary
The AI-written summary on the score card names your largest holding and the largest group of holdings that move together, so the concentration and the overlap are spelled out in words.
A worked example
A fictional portfolio of four holdings: Chip maker A at 40%, Chip maker B at 25%, a supermarket chain at 20% and an electricity utility at 15%. Four tickers, but 65% of the money is in two chip makers whose daily returns have a correlation of 0.82.
| Figure | Score | |
|---|---|---|
| Herfindahl index (H) | 0.285 | 75.3 |
| Largest holding (40%): single-name penalty | 20 points above 20% | −40 |
| Concentration | 35.3 | |
| Average pairwise correlation (6 pairs) | 0.29 | 71 |
| Diversification (half each) | 53.1 |
The pair Chip maker A / Chip maker B (0.82) would top the Strongest correlations list as very high, and the electricity utility’s pairs would sit among the lowest. The average correlation, 0.29, is moderate, so the correlation half scores 71; the concentration half scores 35.3, mostly because one holding is 40% of the portfolio. Diversification: 53.1.
What you need
- An account: you sign in, and your portfolio stays private to it.
- Your holdings: import your broker’s export — DEGIRO, Saxo, Trading 212, Rabobank, Fidelity, Robinhood, E*TRADE, Vanguard, Charles Schwab or Interactive Brokers — or a simple holdings file, or type them in.
- For the Correlations page, two holdings with 30 trading days of prices; for the score, 3 holdings and up to 4 themes, picked from a list or written in your own words.
Create your accountThen import your broker’s export: Diversification is on the score card, the pairs on the Correlations page.
Correlation explained, with three ways to check it yourself →
How the whole 0–100 portfolio score works →
Frequently asked questions
How do I check whether my stocks are really diversified?
Check two things: how concentrated your money is, and how closely your holdings move together. StockDashes does both in its diversification score — concentration and the average correlation over the last 250 trading days — and lists the pairs that move most alike on the Correlations page.
Does owning more stocks make my portfolio more diversified?
Only when the holdings behave differently. Ten companies that rise and fall together are closer to one bet than ten separate ones, which is why correlation is half of the diversification score.
What correlation counts as high?
On the Correlations page, 0.7 and up is very high, 0.4 and up moderate, 0.1 and up low, around zero none, and below −0.1 inverse. Pairs with a low or inverse correlation are the ones that spread your risk.
What does the 20% rule in the score mean?
Every percentage point a single holding sits above 20% of the portfolio takes 2 points off the concentration half: a holding at 35% takes off 30 points.
Which holdings does the check cover?
Holdings listed in the US and European shares that also trade in the US, such as ASML or Shell.
The example portfolio is fictional. Nothing on this page is investment advice.