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This guide covers analyzing your portfolio’s risk exposure, understanding what your holdings are really exposed to, beyond the obvious. The risks that hurt most are usually the ones you did not know you were carrying: correlated positions that all move together when one driver turns. The Skill behind this workflow is Portfolio Monitor.

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When to use this

  • Understanding what factors and themes your portfolio is exposed to
  • Finding correlated risks across positions
  • Stress-testing your holdings against a scenario
  • Getting a clear picture of your real risk, not just position sizes

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Step 1: Map your exposures

Analyze my portfolio's risk exposure. Break down my exposure by sector, factor, and theme, and identify where my biggest concentrations of risk are.

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Step 2: Find correlated risk

The key insight is correlation, not just size: 
Which of my holdings would move together in a downturn? Where am I exposed to the same underlying driver across multiple positions?
Three positions that all depend on rates staying low, or on one end market, are a single bet wearing three names.

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Step 3: Stress-test a scenario

If [scenario, e.g. rates rise sharply / this sector sells off], how would my portfolio likely behave, and which positions are most at risk?

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Step 4: Decide whether to adjust

Given this risk picture, what's the single change that would most reduce my exposure to [the biggest risk], and what would I give up?

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Common mistakes

  • Equating position size with risk. A small position in a volatile, correlated name can carry more risk than a large position in a stable one.
  • Missing the common thread. Diversification by name is not diversification by risk. Look for the shared driver.
  • Stress-testing only the obvious. Test the scenario you are not worried about, not just the one you are.

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Prompt variations

What's my portfolio's exposure to [specific factor, e.g. interest rates, the dollar, a single end market]?

If my largest position fell 30%, what would happen to my overall portfolio, and is that an acceptable risk?