Risk Decomposition
Analysis of how individual holdings contribute to overall portfolio risk.
1
Marginal Contribution to Risk
MCR measures each holding's share of total portfolio volatility. Holdings with MCR greater than their portfolio weight are contributing disproportionately to risk.
2
Diversification Benefit
Diversification benefit quantifies the risk reduction achieved by combining assets that don't move in perfect lockstep. Higher values indicate more effective diversification.