Portfolio Risk Analyzer

Analyze your portfolio to identify concentration risks, calculate Value at Risk, estimate drawdowns, beta, Sharpe ratio, income, run stress tests, and sugges...

Complete investment portfolio risk management system. Analyze positions, calculate risk metrics, stress test scenarios, optimize allocations, and generate institutional-grade risk reports — all without external APIs.

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1. Portfolio Intake

When the user shares their portfolio (positions, tickers, amounts), structure it into this format:

yaml

portfolio:
  name: "User Portfolio"
  currency: USD
  as_of: "2026-02-15"
  positions:
    - ticker: AAPL
      shares: 50
      avg_cost: 185.00
      current_price: 228.50  # Look up via web search
      asset_class: US_EQUITY
      sector: Technology
    - ticker: BTC
      units: 0.5
      avg_cost: 42000
      current_price: 97500
      asset_class: CRYPTO
      sector: Digital Assets
    - ticker: VOO
      shares: 100
      avg_cost: 410.00
      current_price: 535.00
      asset_class: US_EQUITY_ETF
      sector: Broad Market
  cash:
    amount: 15000
    currency: USD

Price Lookup

For each position, use web search to find current price:

• Search: [TICKER] stock price today
• For crypto: [COIN] price USD today
• Record source and timestamp

Portfolio Summary Table

Position	Shares	Cost Basis	Current Value	Weight	P&L	P&L %
AAPL	50	$9,250	$11,425	18.2%	+$2,175	+23.5%
...	...	...	...	...	...	...
TOTAL		$XX,XXX	$XX,XXX	100%	±$X,XXX	±X.X%

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2. Risk Metrics Calculator

Calculate ALL of the following for every portfolio analysis:

2.1 Concentration Risk

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Position Concentration:
- Any single position >20% of portfolio = HIGH RISK ⚠️
- Any single position >10% = MODERATE RISK
- Top 3 positions >50% = CONCENTRATED

Sector Concentration:
- Any sector >30% = OVERWEIGHT
- Count unique sectors — fewer than 4 = UNDER-DIVERSIFIED

Asset Class Breakdown:
- Equities: X%
- Fixed Income: X%
- Crypto: X%
- Cash: X%
- Alternatives: X%

2.2 Value at Risk (VaR) — Parametric Method

Calculate the maximum expected loss at given confidence levels:

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Daily VaR Calculation:
1. Look up each position's historical volatility (annualized)
   - Use web search: "[TICKER] historical volatility 30 day"
   - Typical ranges: Large cap stocks 15-25%, Crypto 50-80%, Bonds 5-10%

2. Convert to daily volatility:
   Daily Vol = Annual Vol / √252

3. Position VaR (95% confidence):
   Position VaR = Position Value × Daily Vol × 1.645

4. Position VaR (99% confidence):
   Position VaR = Position Value × Daily Vol × 2.326

5. Portfolio VaR (simplified — assumes correlation ≈ 0.5 for stocks):
   Portfolio VaR ≈ √(Σ(Position VaR²) + 2×0.5×Σ(VaR_i × VaR_j))

Report:
- 1-Day 95% VaR: $X,XXX (X.X% of portfolio)
- 1-Day 99% VaR: $X,XXX (X.X% of portfolio)
- 10-Day 95% VaR: $X,XXX (= 1-Day VaR × √10)
- Monthly 95% VaR: $X,XXX (= 1-Day VaR × √21)

2.3 Maximum Drawdown Estimation

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Based on asset class historical max drawdowns:
- US Large Cap: -50% (2008-09), typical correction -20%
- US Small Cap: -55%, typical correction -25%
- International Equity: -55%, typical -25%
- Emerging Markets: -65%, typical -30%
- Investment Grade Bonds: -15%, typical -5%
- High Yield Bonds: -30%, typical -10%
- REITs: -70%, typical -25%
- Crypto (BTC): -85%, typical -50%
- Gold: -45%, typical -15%
- Cash: 0%

Portfolio Max Drawdown Estimate:
= Σ(Position Weight × Asset Class Max Drawdown)

Report:
- Estimated worst-case drawdown: -$XX,XXX (XX.X%)
- Estimated typical correction: -$XX,XXX (XX.X%)
- Recovery time estimate: X-X months (based on historical averages)

2.4 Beta & Market Sensitivity

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For each equity position:
- Look up beta via web search: "[TICKER] beta"
- Portfolio Beta = Σ(Position Weight × Position Beta)

Interpretation:
- Beta > 1.2: Portfolio is AGGRESSIVE (amplifies market moves)
- Beta 0.8-1.2: Portfolio is NEUTRAL
- Beta < 0.8: Portfolio is DEFENSIVE
- Negative beta positions: HEDGE value

Market Impact:
- If S&P 500 drops 10%, portfolio expected to move: Beta × -10%

2.5 Sharpe Ratio Estimation

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Portfolio Expected Return = Σ(Weight × Expected Return)
Where Expected Return by asset class:
- US Large Cap: 8-10% annually
- US Small Cap: 9-11%
- International Developed: 6-8%
- Emerging Markets: 8-12%
- Investment Grade Bonds: 4-5%
- High Yield: 6-7%
- Crypto: highly variable (use 0% for conservative estimate)
- REITs: 7-9%
- Cash: current money market rate (~4.5%)

Risk-Free Rate: current 3-month T-bill rate (search if needed)

Sharpe Ratio = (Portfolio Expected Return - Risk-Free Rate) / Portfolio Volatility

Rating:
- > 1.0: EXCELLENT risk-adjusted returns
- 0.5-1.0: GOOD
- 0-0.5: MEDIOCRE — consider rebalancing
- < 0: POOR — return doesn't justify risk

2.6 Income Analysis

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For dividend-paying positions:
- Look up dividend yield: "[TICKER] dividend yield"
- Annual Income = Shares × Annual Dividend per Share
- Portfolio Yield = Total Annual Dividends / Portfolio Value

Report:
- Monthly estimated income: $XXX
- Annual estimated income: $X,XXX
- Yield on cost: X.X%
- Current yield: X.X%

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3. Stress Testing

Run these scenarios against the portfolio and report impact:

3.1 Standard Scenarios

yaml

scenarios:
  market_crash_2008:
    name: "2008 Financial Crisis"
    impacts:
      US_EQUITY: -0.50
      INTL_EQUITY: -0.55
      EMERGING: -0.60
      BONDS: +0.05
      HIGH_YIELD: -0.30
      REITS: -0.70
      CRYPTO: -0.80  # projected based on risk profile
      GOLD: +0.10
      CASH: 0

  covid_crash_2020:
    name: "COVID-19 Crash (Feb-Mar 2020)"
    impacts:
      US_EQUITY: -0.34
      INTL_EQUITY: -0.35
      EMERGING: -0.35
      BONDS: +0.03
      HIGH_YIELD: -0.20
      REITS: -0.40
      CRYPTO: -0.50
      GOLD: -0.05
      CASH: 0

  dot_com_2000:
    name: "Dot-Com Bust (2000-2002)"
    impacts:
      US_EQUITY: -0.45
      TECH: -0.75  # Apply to technology sector specifically
      INTL_EQUITY: -0.40
      BONDS: +0.15
      CASH: 0

  rate_hike_shock:
    name: "Rapid Rate Hike (+300bps)"
    impacts:
      US_EQUITY: -0.15
      BONDS: -0.15
      HIGH_YIELD: -0.10
      REITS: -0.25
      CRYPTO: -0.20
      GOLD: -0.10
      CASH: +0.01  # higher yields

  inflation_surge:
    name: "Stagflation (persistent 8%+ inflation)"
    impacts:
      US_EQUITY: -0.20
      BONDS: -0.20
      CRYPTO: -0.10  # debatable hedge
      GOLD: +0.15
      REITS: -0.05
      COMMODITIES: +0.20
      CASH: -0.03  # real value erosion

  crypto_winter:
    name: "Crypto Winter (80% drawdown)"
    impacts:
      CRYPTO: -0.80
      US_EQUITY: -0.05  # minor contagion

3.2 Stress Test Report Format

For each scenario:

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📉 SCENARIO: [Name]

| Position | Current Value | Stressed Value | Loss |
|----------|--------------|----------------|------|
| AAPL     | $11,425      | $5,713         | -$5,712 |
| ...      | ...          | ...            | ...  |
| TOTAL    | $XX,XXX      | $XX,XXX        | -$XX,XXX (-XX.X%) |

Could you survive this? [YES/NO based on cash reserves and income needs]
Recovery estimate: X-X months

3.3 Custom Scenario Builder

If user describes a specific worry, build a custom scenario:

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User: "What if tech crashes 40% but bonds rally?"
→ Build custom impact map, apply to portfolio, report results

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4. Portfolio Optimization

4.1 Current Allocation Assessment

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Compare current allocation to standard models:

AGGRESSIVE (Age <35, high risk tolerance):
  Equities: 80-90%, Bonds: 5-10%, Alternatives: 5-10%, Cash: 2-5%

GROWTH (Age 35-50):
  Equities: 60-75%, Bonds: 15-25%, Alternatives: 5-10%, Cash: 5%

BALANCED (Age 50-60):
  Equities: 40-60%, Bonds: 30-40%, Alternatives: 5-10%, Cash: 5-10%

CONSERVATIVE (Age 60+, income focus):
  Equities: 20-40%, Bonds: 40-50%, Alternatives: 5%, Cash: 10-20%

Current allocation matches: [MODEL] profile
Recommended adjustments: [specific moves]

4.2 Risk Parity Analysis

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Risk Parity Target: Each asset class contributes EQUAL risk to portfolio

Steps:
1. Calculate each position's risk contribution:
   Risk Contribution = Weight × Volatility × Correlation_with_portfolio

2. For equal risk contribution:
   Target Weight_i = (1/Vol_i) / Σ(1/Vol_j)

3. Report:
   Current vs Risk-Parity weights
   Trades needed to rebalance
   Expected impact on Sharpe Ratio

4.3 Rebalancing Recommendations

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Check rebalancing triggers:
- Any position drifted >5% from target? → REBALANCE
- Any asset class drifted >10% from target? → REBALANCE
- Last rebalance >6 months ago? → REVIEW

Rebalancing Method:
1. Calculate target weights
2. Calculate current weights
3. Determine trades needed (minimize transactions)
4. Tax-lot optimization: sell highest-cost lots first (minimize tax)
5. Consider wash sale rules if harvesting losses

Output trade list:
| Action | Ticker | Shares | Est. Value | Reason |
|--------|--------|--------|-----------|--------|
| SELL   | AAPL   | 15     | $3,428    | Overweight tech |
| BUY    | BND    | 25     | $1,850    | Underweight bonds |

4.4 Correlation Analysis

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Assess diversification quality:

HIGH correlation pairs (>0.7) — these DON'T diversify each other:
- Tech stocks with each other
- US equity ETFs with each other
- High yield bonds with equities

LOW correlation pairs (<0.3) — TRUE diversifiers:
- Stocks vs Treasury bonds
- US vs Gold
- Equities vs Managed Futures

NEGATIVE correlation — HEDGES:
- Long equity + Put options
- Stocks + VIX products
- Growth + Value in some regimes

Grade portfolio diversification: A/B/C/D/F

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5. Risk Score Card (0-100)

Generate a single risk score:

yaml

risk_scorecard:
  concentration_risk:
    weight: 20
    score: X  # 100 = well diversified, 0 = single stock
    details: "Top position is X%, X sectors represented"

  volatility_risk:
    weight: 20
    score: X  # 100 = low vol, 0 = extremely volatile
    details: "Portfolio annualized vol: X%"

  drawdown_risk:
    weight: 20
    score: X  # 100 = minimal drawdown exposure, 0 = could lose 50%+
    details: "Max estimated drawdown: X%"

  liquidity_risk:
    weight: 15
    score: X  # 100 = all highly liquid, 0 = illiquid positions
    details: "X% in liquid large-cap, X% in illiquid"

  income_resilience:
    weight: 10
    score: X  # 100 = strong income, 0 = no yield
    details: "Portfolio yield: X%, X% from reliable dividend payers"

  market_sensitivity:
    weight: 15
    score: X  # 100 = low beta/defensive, 0 = highly aggressive
    details: "Portfolio beta: X.XX"

  overall_score: X/100
  rating: "[CONSERVATIVE|MODERATE|AGGRESSIVE|SPECULATIVE]"
  recommendation: "[Key action item]"

Score Interpretation

• 80-100: FORTRESS — Well-protected, may be too conservative for growth
• 60-79: SOLID — Good risk management, minor improvements possible
• 40-59: MODERATE — Reasonable but has notable risk exposures
• 20-39: ELEVATED — Significant vulnerabilities, rebalancing recommended
• 0-19: DANGER ZONE — Extreme concentration or volatility, urgent action needed

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6. Monitoring & Alerts

Daily Check Template (for cron/heartbeat use)

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For each portfolio position:
1. Check price vs previous close (web search)
2. Flag if any position moved >3% in a day
3. Flag if any position hit stop-loss level
4. Check for earnings/events in next 7 days

Alert Thresholds:
- Single position -5% in a day → ALERT
- Portfolio -3% in a day → ALERT
- Position hits 52-week low → WATCH
- VIX > 25 → ELEVATED CAUTION
- VIX > 35 → HIGH ALERT — review hedges

Weekly Review Template

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## Portfolio Weekly Review — [Date]

### Performance
- Portfolio value: $XX,XXX (±X.X% week)
- Best performer: [TICKER] +X.X%
- Worst performer: [TICKER] -X.X%
- vs S&P 500: [outperformed/underperformed] by X.X%

### Risk Changes
- VaR change: $X,XXX → $X,XXX
- Any new concentration issues? [Y/N]
- Rebalancing needed? [Y/N]

### Upcoming Events
- Earnings: [tickers and dates]
- Ex-dividend dates: [tickers and dates]
- Fed/macro events: [list]

### Action Items
1. [Specific recommendation]
2. [Specific recommendation]

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7. Tax-Loss Harvesting Scanner

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For each position with unrealized losses:
1. Calculate unrealized loss: (Current Price - Avg Cost) × Shares
2. Check if loss >$500 (worth harvesting)
3. Identify tax-efficient replacement:
   - Same sector ETF (avoids wash sale)
   - Similar factor exposure
   - Hold replacement 31+ days before switching back

Report:
| Ticker | Unrealized Loss | Replacement | Wash Sale Clear Date |
|--------|----------------|-------------|---------------------|
| XYZ    | -$2,500        | Similar ETF | [date + 31 days]   |

Estimated tax savings: $X,XXX (at X% marginal rate)

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8. Special Asset Classes

Crypto Portfolio Risk

Additional crypto-specific metrics:

• Bitcoin dominance correlation
• Exchange risk (centralized vs self-custody)
• Protocol risk for DeFi positions
• Stablecoin exposure and depeg risk
• Tax implications of staking/yield

Real Estate (REITs/Property)

• FFO yield vs dividend yield
• Interest rate sensitivity
• Geographic concentration
• Property type diversification (residential/commercial/industrial)

Options Positions

If portfolio includes options:

• Delta exposure (equivalent stock position)
• Theta decay (daily time value loss)
• Implied volatility vs historical
• Max loss calculation
• Breakeven prices

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9. Report Generation

Full Risk Report (on request)

Generate a complete PDF-ready markdown report:

markdown

# Portfolio Risk Report
## Prepared: [Date]
## Portfolio: [Name]

### Executive Summary
[2-3 sentence overview: total value, risk rating, top recommendation]

### 1. Holdings Summary
[Position table from Section 1]

### 2. Risk Metrics
[All calculations from Section 2]

### 3. Stress Test Results
[All scenarios from Section 3]

### 4. Optimization Recommendations
[From Section 4]

### 5. Risk Scorecard
[From Section 5]

### 6. Action Plan
[Prioritized list of recommended changes]

### Disclaimer
This analysis is for informational purposes only and does not constitute
financial advice. Past performance and historical data do not guarantee
future results. Consult a qualified financial advisor before making
investment decisions.

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10. Quick Commands

Respond to these natural language requests:

User Says	Action
"Analyze my portfolio"	Full Section 1-5 analysis
"What's my risk?"	Risk Scorecard (Section 5)
"Stress test my portfolio"	All scenarios (Section 3)
"What if the market crashes?"	2008 + COVID scenarios
"How should I rebalance?"	Section 4 optimization
"Tax loss harvest"	Section 7 scanner
"Weekly review"	Section 6 weekly template
"Add [position]"	Update portfolio YAML, recalculate
"Remove [position]"	Update portfolio YAML, recalculate
"What's my VaR?"	Value at Risk calculation (Section 2.2)
"Compare to S&P 500"	Benchmark comparison
"How diversified am I?"	Concentration + correlation analysis
"What's my Sharpe ratio?"	Section 2.5
"Set alert for [ticker] at [price]"	Add to monitoring (Section 6)

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Edge Cases

Small Portfolios (<$10K)

• Skip VaR (not meaningful for small amounts)
• Focus on concentration risk and savings rate
• Recommend index-first approach

Single Stock Portfolios (e.g., company RSUs)

• ALWAYS flag extreme concentration risk
• Model collar strategies (protective put + covered call)
• 10b5-1 plan reminder for insiders
• Calculate how much to diversify per quarter

Crypto-Heavy (>50% crypto)

• Apply crypto winter scenario prominently
• Flag exchange counterparty risk
• Recommend cold storage percentage
• Note tax complexity of DeFi/staking

International Portfolios

• Currency risk calculation
• Country risk premium
• Withholding tax impact on dividends
• ADR vs local share considerations

Leveraged Positions (margin/options)

• Calculate margin call price
• Stress test at 2x normal drawdown
• Flag if margin utilization >50%
• Model forced liquidation scenarios

Retirement Accounts (IRA/401k)

• Different tax treatment (no tax-loss harvesting needed)
• RMD impact for traditional IRA
• Roth conversion opportunity analysis
• Sequence of returns risk for near-retirees