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diversification

Calculate portfolio variance, volatility, diversification ratio, HHI concentration, and risk contributions from covariance matrices and asset weights.

164|33|Updated Feb 15, 2026
Search Tags:#risk management#asset allocation#diversification#portfolio construction#covariance#efficient frontier
One-click install
npx skills add https://github.com/JoelLewis/finance_skills --skill diversification
Or copy as Structured Prompt for Agent▼
Please help me install this Agent Skill.
Skill: diversification
Source: https://github.com/JoelLewis/finance_skills/tree/main/plugins/wealth-management/skills/diversification
Command: npx skills add https://github.com/JoelLewis/finance_skills --skill diversification

SYSTEM DOCUMENTATION & REQUIREMENTS

💡 This Skill requires numpy, and includes scripts (resource) and references (resource) components.

What problem does it solve?

This Skill helps users understand and implement portfolio diversification strategies to reduce risk and improve investment outcomes.

Core Features & Use Cases

  • Portfolio Variance Calculation: Compute the risk of a multi-asset portfolio.
  • Efficient Frontier & Minimum Variance Portfolio: Identify optimal portfolio allocations.
  • Risk Contribution Analysis: Understand which assets contribute most to portfolio risk.
  • Use Case: A user wants to know how to allocate their assets to minimize risk for a given level of expected return, or how much risk a specific portfolio currently holds.

Quick Start

Calculate the diversification ratio for a portfolio with given weights and covariance matrix.

Frequently Asked Questions about diversification

High-intent search queries and answers about installing and using this skill.

FAQPage Schema
How do I calculate portfolio variance using a covariance matrix and asset weights?▼

Calculate portfolio variance by multiplying asset weights with the covariance matrix to quantify total risk, enabling quantitative finance professionals to build resilient portfolios and optimize asset allocation.

What is the diversification ratio and how does it measure portfolio risk?▼

The diversification ratio measures portfolio diversification by comparing weighted average asset volatility to overall portfolio volatility, helping you assess whether asset allocation effectively reduces risk through covariance analysis.

How do I identify the minimum variance portfolio on the efficient frontier?▼

Find the minimum variance portfolio by calculating variance across asset weight combinations using covariance matrices, identifying the allocation point on the efficient frontier that delivers the lowest possible risk.

Can I analyze risk contributions to see which assets add the most portfolio risk?▼

Analyze risk contributions by decomposing portfolio variance into individual asset components using covariance matrices and weights, revealing which assets disproportionately drive portfolio volatility for better risk management.

Does this portfolio construction tool require numpy for numerical computations?▼

Yes, this portfolio construction tool requires numpy to perform numerical computations for variance, volatility, diversification ratio, and HHI concentration calculations using covariance matrices and asset weights.

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