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Portfolio Concentration Stress Test

Estimate portfolio damage from a concentrated stock and sector shock.
Estimated portfolio loss
17.80%
Stressed portfolio value
$82,200
Loss from largest holding
8.00%

The model decomposes a simple correlated shock. It shows why the weight and co-movement of holdings matter more than ticker count.

Holding many tickers does not guarantee diversification when one company or sector drives the result. Enter portfolio value, largest-position weight, total sector weight, and scenario declines to estimate the portfolio-level loss and the contribution from the biggest holding.

Formula reviewed 2026-08-021 primary sourceMethodology and disclosures →

How this portfolio concentration stress test works

The largest holding is modeled inside the selected sector. The calculator applies one decline to that holding, a second to the rest of the sector, and a third to all remaining assets.

Formula

Portfolio loss = largest weight × largest decline + remaining sector weight × sector decline + other weight × other decline

Real correlations change during stress, and holdings can gap, halt, or recover at different speeds. This is a transparent scenario rather than a statistical VaR model.

Primary specifications

Before you use the result

Assumptions

  • • The largest holding is part of the entered sector weight.
  • • Weights sum to the full portfolio and do not change during the shock.
  • • The scenario excludes leverage, taxes, liquidity, and currency effects.

Quick start

  1. 1. Enter current portfolio and concentration weights.
  2. 2. Choose a severe but interpretable set of declines.
  3. 3. Repeat with different correlations and compare the loss with your risk capacity.

Frequently asked questions

Is owning many stocks automatically diversified?

No. Funds and stocks can share the same companies, sectors, factors, currencies, or macro drivers.

What decline should I test?

Use several scenarios tied to the volatility and business risks of the holdings rather than one generic market decline.

Is this value at risk?

No. It does not assign probabilities or estimate a return distribution; it applies the explicit shocks you enter.

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Go deeper

Investing glossaryUnderstand the conceptsStock researchApply it to real names

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