EXPERIMENT 01 / MARKET & TAIL RISK
When diversification fails
Stress the assumptions behind your portfolio. See what happens to losses when volatility rises and assets move together.
Start with the question
Can two different investments fail together?
Follow three changes, then test your own assumptions.
Explore the settingsChapter 1 of 3
Start with a shared exposure
A portfolio can hold different industries and still be exposed to the same market. Begin with the simulated baseline calibrated to historical returns.
Read the daily loss distribution. The right-hand tail contains the worst losses.
What stays fixed?
A 60% technology / 40% defensive-industry equity portfolio, daily horizon, 97.5% confidence, and the same simulation seed. Both sleeves are equities; this is not a stock–bond portfolio.
The terms, in plain language
- Correlation
- How closely two investments move together.
- VaR
- A loss threshold at the selected confidence level; larger losses remain possible.
- Expected Shortfall (ES)
- The average loss in the tail beyond that threshold.
Loading reproducible evidence…
Your turn
Explore the settings.
Change one assumption at a time. Run a calculation to update the evidence, then inspect or download the result.