Diversification
Score.
Do your stocks really diversify each other? Pick one stock from each sector group and this tool measures how closely their daily moves match. Ray Dalio's rule: 15 or more good return streams that do not move together cut risk by about 80% without cutting the expected return.
The score runs from 0 to 100. It is the cut in risk your chosen stocks achieve, measured from their own daily price moves, as a share of the 74% cut that 15 stocks with zero correlation would give. Stocks from different sectors still share one market, so most mixes land well below 100.
How Alike Do
They Move?
Choose a stock in each group you want to include, two or more. Leave a group on None to skip it. The result updates as you choose, and the page address holds your picks so you can share them.
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How Is The Score
Worked Out?
What is the Holy Grail of investing?
Ray Dalio, founder of Bridgewater, calls it the Holy Grail: find about 15 good return streams that are truly uncorrelated and hold them together. The mix keeps the average return of its parts but is far less volatile. For equal parts with average correlation r, risk falls to the square root of (1 + (n − 1) × r) / n of one part's risk. At n = 15 and r = 0 that is 26% of the risk, a 74% cut; Dalio's "about 80%" also counts streams that run at different volatilities.
How does this tool measure it?
- Correlation is worked out from each pair's daily price changes on the days all your stocks traded, over 1, 3 or 5 years (3 by default).
- Risk cut compares the swings of an equal-weighted mix with the average swing of its parts: 1 minus the mix's volatility over the average volatility.
- Independent bets is n divided by (1 + (n − 1) × average correlation): how many truly separate stocks the mix behaves like.
- The score is the risk cut divided by 74%, the cut 15 uncorrelated streams give, capped at 100.
| Score | Reading | What it means |
|---|---|---|
| Under 35 | Concentrated | The stocks move mostly as one; a bad week for one is a bad week for all |
| 35 to 59 | Partly diversified | Some offsetting, but a shared driver still dominates |
| 60 to 79 | Well spread | Real offsetting between holdings |
| 80 and up | Close to the holy grail | Near what 15 uncorrelated streams would deliver |
The groups are the 12 on the Sector Map. For a closer look at one group, see the pages for technology, financial and health care stocks.
Frequently asked questions
What is a good correlation between stocks?
Lower is better for diversification. Below 0.3 is weak co-movement, 0.3 to 0.6 is moderate and above 0.6 means the two stocks mostly move together. This page tints a pair green, amber or red on those edges.
How many stocks do you need to be diversified?
It depends on how alike they are, not on the count. Over the three years to October 2026, eight mega-cap technology stocks behaved like 2.2 independent bets, while twelve stocks spread across the twelve sector groups behaved like 4.4. The independent bets figure on this page shows which case you are in.
Why do stocks from different sectors still correlate?
They share one market, one interest rate and one economy. Average pairwise correlation between large US stocks is well above zero, so a stock mix cannot reach 15 fully independent streams. Dalio's full Holy Grail also uses bonds, commodities and other markets.
Does correlation change over time?
Yes. It tends to rise in sell-offs, when stocks fall together. Switch between the 1, 3 and 5 year windows to see how much your result depends on the period measured.
Is the score a recommendation?
No. It describes how the chosen stocks moved together in the past. It does not say whether any of them is a good investment or what they will do next.
How do you measure stock diversification? About this tool
This diversification score calculator tests Ray Dalio's Holy Grail idea on your own stocks: it takes one stock per sector, measures the correlation of their daily returns and shows how much risk the mix removes against a 15-stream benchmark. See the glossary for the terms and Editorial Standards for how this site works.
Educational content only, not investment advice. Correlations come from past daily prices and change over time. A high score does not make a portfolio safe, and a low one does not make it a poor choice. Always do your own research.