Risk Parity Weight Calculator
Risk parity flips the usual portfolio question. Instead of asking how to split your capital, it asks how to split your risk so that no single asset dominates. The simplest, most transparent version is inverse-volatility weighting: each asset's weight is proportional to one divided by its volatility, so calm assets get a larger share and jumpy assets a smaller one. The result is a portfolio where each asset contributes roughly the same standalone risk. This calculator takes the volatility of each asset, one per line, and returns the inverse-volatility weight for each as a percentage that sums to 100.
Inverse-volatility weight formula
inverse_i = 1 / volatility_i
weight_i = inverse_i / sum of all inverse values
weight_i as % = weight_i * 100
Each weight is proportional to the reciprocal of the asset's volatility, then normalized so the weights sum to 100%. This equalizes each asset's standalone risk contribution under the assumption of zero correlation.
Notes on using risk parity
- Lower-volatility assets receive higher weights, often tilting toward bonds.
- The method assumes assets are uncorrelated; correlated assets need full risk budgeting.
- Use a consistent volatility basis (for example annualized standard deviation) for every asset.
- Weights depend only on relative volatilities, so scaling all inputs leaves them unchanged.
- Many real risk parity strategies add leverage to reach a target portfolio volatility.
Risk parity: frequently asked questions
What is risk parity?
Risk parity is a portfolio construction approach that sets weights so each asset contributes an equal share of total risk, rather than an equal share of capital. A low-volatility asset gets a larger weight and a high-volatility asset gets a smaller weight, balancing their risk contributions.
How are inverse-volatility weights calculated?
The simplest risk parity method, often called naive risk parity, sets each asset's weight proportional to the inverse of its volatility. Weight equals (1 divided by the asset's volatility) divided by the sum of (1 divided by volatility) across all assets. This assumes assets are uncorrelated; with correlations, a full risk-budgeting optimization is needed.
Why does a less volatile asset get more weight?
Because risk parity equalizes risk contribution, not dollars. A calm asset must be held in a larger amount to contribute the same risk as a volatile one. This typically tilts portfolios toward bonds and away from concentrating risk in equities.
Does this calculator account for correlations?
No. It uses the naive inverse-volatility method, which assumes assets are uncorrelated and therefore equalizes each asset's standalone risk contribution. True risk parity with correlated assets requires solving for equal marginal risk contributions, which needs a covariance matrix.
What volatility figure should I enter?
Use each asset's standard deviation of returns over a consistent period, such as annualized volatility from historical returns. The weights depend only on the relative volatilities, so the units cancel as long as you use the same basis for every asset.
Official sources
- U.S. Securities and Exchange Commission, Investor.gov: Investing glossary.
- National Institute of Standards and Technology: NIST/SEMATECH e-Handbook of Statistical Methods.
Reviewed by the CalculatorHub team, edited by James Graham, 17 June 2026. See our methodology.