Dispersion Index
See how widely the holdings in a saved portfolio are moving relative to one another. The fan opens according to where dispersion ranks in that portfolio’s recent history.
Presets use an approximately $100,000 equal-notional portfolio, with whole-contract futures sizing. To create and save a custom portfolio, use the Correlations page.
Actual Indexed Paths
Each holding and the portfolio are indexed to 100 at the beginning of the displayed 250-observation period. The heavier dark line is the portfolio.
Dispersion Fan
Dispersion: √(weighted constituent variance − portfolio variance).
Weighted constituent variance: Σ wiσi2, where wi is the holding’s EOD portfolio weight and σi is its annualized volatility.
Portfolio variance: ΣiΣj wiwjσiσjρij, where ρij is the correlation between holdings i and j. Portfolio volatility is the square root of portfolio variance.
Historical percentile: the percentage of the 250 EOD dispersion observations that were at or below the selected reading. A 48th-percentile reading means approximately 48% were at or below it and approximately 52% were higher. The fan opens according to this percentile, not directly according to the numerical dispersion percentage.
Wide versus narrow: a wide fan means dispersion is high relative to this portfolio’s 250-observation history. The weighted standalone variance of the holdings is substantially greater than the combined portfolio variance, indicating more offset among their movements. A narrow fan means the two variance measures are closer, indicating less offset; it can also occur when individual holding volatilities are relatively low. Fan width is not itself a measure of portfolio danger.
Constituent variance diversified away: (weighted constituent variance − portfolio variance) ÷ weighted constituent variance. For May 28: (0.093663 − 0.027598) ÷ 0.093663 = 70.53%. It does not mean that 70.53% of potential losses has been eliminated.