Asset Allocation
How a portfolio is divided among different asset classes.
Beta
Measures a stock's sensitivity to market movements — how much it tends to rise or fall relative to the overall market.
Black Swan
An extremely rare, high-impact event that is nearly impossible to predict using historical data and standard risk models.
CAPM
Estimates a stock's required return based on its beta and the expected market risk premium.
Concentration Risk
The risk of amplified losses from overexposure to a single asset, issuer, sector, geography, or counterparty.
Correlation
Measures how consistently two return series move together, from −1 (perfect inverse) to +1 (perfect positive).
Currency Exposure
The sensitivity of a portfolio's returns to changes in foreign exchange rates.
Diversification
Spreading investments across assets to reduce risk.
Equity Risk
The risk of financial loss from a decline in the market value of stocks held in a portfolio.
Liquidity Risk
The risk of being unable to sell an asset quickly at a fair price, or of being unable to meet financial obligations as they come due.
Market Risk
The risk of losses due to broad movements in financial markets, including equity prices, interest rates, currency rates, and commodity prices.
Max Drawdown
The largest peak-to-trough decline in a portfolio's value — the worst-case loss any investor could have experienced.
R-Squared
The proportion of a fund's return variation explained by its benchmark, from 0 (no relationship) to 1 (perfect fit).
Risk Tolerance
The degree of investment risk an investor is willing and able to accept.
Risk
The possibility that an investment's actual return will differ from its expected return.
Scenario Analysis
A risk management technique that evaluates how a portfolio performs under a range of hypothetical future market conditions.
Sensitivity Analysis
A technique that measures how changes in a single input variable affect the value of an investment or model output.
Standard Deviation
Measures the dispersion of returns around the average — the most common gauge of investment volatility.
Systematic Risk
Market-wide risk that cannot be eliminated through diversification.
Tracking Error
The standard deviation of the difference between a portfolio's returns and its benchmark.
Unsystematic Risk
Company- or industry-specific risk that can be reduced through diversification.
Value at Risk
The maximum dollar loss not expected to be exceeded over a given period at a specified confidence level.
Variance
The average squared deviation of returns from their mean — the square of standard deviation.