Risk Calculator
Calculate investment risk, compare options, and assess potential losses with statistical analysis
Calculate Risk
Likelihood of experiencing the loss (0-100%)
Maximum amount you could lose if failure occurs
Investment Risk Example
Scenario: Stock Investment Options
Option A: Conservative stock portfolio
Investment: $2,000
Potential Loss: $1,000 (50% of investment)
Probability of Failure: 12%
Option B: Aggressive Growth Stocks
Investment: $2,000
Potential Loss: $2,000 (100% of investment)
Probability of Failure: 7%
Risk Calculation
Option A Risk = 12% × $1,000 = $120
Option B Risk = 7% × $2,000 = $140
Conclusion: Option A has lower risk ($120 vs $140)
Risk Level Guide
Low Risk
≤5% expected loss
Conservative investments, bonds
Moderate Risk
5-15% expected loss
Balanced portfolios, mixed funds
High Risk
15-30% expected loss
Growth stocks, emerging markets
Very High Risk
>30% expected loss
Speculative investments, crypto
Risk Management Tips
Diversify investments across different asset classes
Never invest more than you can afford to lose
Consider risk-adjusted returns, not just potential profits
Use stop-loss orders to limit potential losses
Regularly review and rebalance your portfolio
Understanding Risk Calculation
What is Risk?
Risk is a statistical measure that quantifies the uncertainty or potential for loss in an investment or decision. It combines the likelihood of an adverse outcome with the magnitude of that outcome to provide a single metric for comparison and decision-making.
Applications of Risk Calculation
- •Investment portfolio management
- •Insurance premium calculations
- •Project risk assessment
- •Business decision analysis
Risk Formula
Risk = Probability × Loss
Expected Value = Probability of Failure × Amount at Risk
Key Considerations
Probability: Historical data, expert estimates, or statistical models
Loss Magnitude: Total potential financial impact
Time Horizon: Risk probability may change over time
Value at Risk (VaR)
Statistical measure of the maximum potential loss over a specific time period at a given confidence level.
Risk-Adjusted Return
Performance measure that takes into account the degree of risk taken to achieve returns (Sharpe ratio).
Monte Carlo Simulation
Advanced technique using random sampling to model complex risk scenarios with multiple variables.