Portfolio Risk Analyzer

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:

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

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:

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

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

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

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

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

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:

📉 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:

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

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]

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