A portfolio can hold several symbols and still depend on one market outcome. Banks, financial indices, lenders and rate-sensitive companies may move together during an event, making the combined loss larger than each separate stop suggests.
Map the common drivers
Group positions by index weight, sector, business exposure, currency, commodity or scheduled event. The same security can belong to more than one risk group.
- Broad-market beta
- Sector exposure
- Shared event
- Similar strategy or timeframe
Do not treat historical correlation as fixed
Relationships can strengthen during stress and weaken during normal markets. Historical correlation is context, not a guarantee of diversification.
Calculate total open risk
Add the planned rupee loss of all positions, then examine how much belongs to the same driver. A portfolio limit can require reduced size even when each individual trade fits its own risk rule.
Review hedges for mismatch
An index hedge may reduce broad exposure without protecting company-specific or sector-specific risk. Define what the hedge is expected to offset and what remains unhedged.
Build an exposure map
List every open position, direction, rupee risk, broad index, sector and known event. Add derivatives according to their underlying exposure rather than treating each contract symbol as a separate asset.
Group positions that can lose from the same scenario, such as a financial-sector decline or volatility contraction. The map should show where diversification is real and where it is only a larger list of symbols.
- Position and direction
- Maximum planned loss
- Common market driver
- Shared event window
Set concentration limits before adding the next trade
Define maximum total open risk and smaller limits for one sector, factor or event. A new setup must fit both its individual limit and the remaining portfolio capacity.
Recalculate after price movement, partial exits or a change in stop. Correlation and open risk are dynamic, so the entry-day map cannot be assumed to remain accurate.
- Portfolio risk limit
- Cluster risk limit
- Remaining risk capacity
- Next review trigger