Crypto and Equity Inverse Volatility Calculator
Compare crypto and equity target weights from annual volatility assumptions. See the inverse volatility method and its limits.
How it works
Enter annual volatility percentages for crypto and equity. The calculator assigns target weights in proportion to inverse volatility. For assumptions of 60% and 20%, the tested calculation returns targets of 25% and 75%.
The two target weights sum to 100%. Under this rule, the asset with lower assumed volatility receives the higher target weight. The displayed products are each target weight multiplied by that asset’s standalone volatility.
These products are not covariance based risk contributions. In a two asset model, inverse volatility weights give equal volatility risk contributions when portfolio volatility is positive. The page does not calculate covariance or total portfolio volatility, and those contributions are undefined when portfolio volatility is zero.
Compare this target with a broader portfolio measure when you need additional assets or risk inputs. Read the assumptions for each related tool before comparing its output.
Step by step
- Enter both volatility assumptions
- Review the inverse volatility targets
- Vary one assumption and compare
Worked example
Enter crypto volatility of 60% and equity volatility of 20%. The target is 25% crypto and 75% equity, as the tested inverse volatility formula shows.
The weighted standalone volatility products are 15% each: 0.25 × 60% and 0.75 × 20%. The page does not calculate covariance based risk contributions or total portfolio volatility.
When to use this calculator
Use this calculator to compare two target weights under different crypto and equity volatility assumptions. It is useful for checking how the inverse volatility rule responds to changed inputs.
For an allocation decision, consider what this two asset calculation leaves out, including covariance, your current holdings, costs, and personal circumstances.
Common interpretation errors
Do not enter a decimal fraction such as 0.60 when you mean 60%. Enter volatility as a percentage number, and use comparable annual estimates for both assets.
Do not interpret weighted standalone volatility products as the full risk contribution display. The page does not calculate covariance or total portfolio volatility.
Inverse volatility formula
Crypto target = (1 / crypto volatility) / ((1 / crypto volatility) + (1 / equity volatility)) × 100
Equity target = 100 − crypto target
The displayed products are weighted standalone volatilities. This page does not calculate covariance based risk contributions or portfolio volatility. Targets are rounded to two decimal places for display.
Assumptions and limits
The result depends on the two annual volatility estimates you enter. The page does not estimate volatility from prices or use covariance, correlation, fees, taxes, or personal circumstances. It displays target weights and weighted standalone volatility products, not portfolio volatility or covariance based risk contributions. The calculation does not forecast returns or determine an appropriate allocation.
Key terms
- Inverse volatility target
- Each target is proportional to the inverse of that asset’s volatility.
- Page inputs
- The calculator displays both target weights and weighted standalone volatility products for crypto and equity.
- Weighted standalone volatility
- The target weight multiplied by an asset’s volatility. The displayed product is not a covariance based risk contribution.
Compare related tools
Compare a larger multi asset allocation with Risk Parity Allocator, or inspect beta with Portfolio Beta Calculator. These tools use different inputs and answer different questions.
Use this calculator for a two asset inverse volatility target. Open a related tool when you need a broader portfolio measure or a model with additional inputs.
FAQ
What do inverse volatility weights mean?
Each target is proportional to the inverse of its volatility. With crypto volatility at 60% and equity volatility at 20%, the target weights are 25% and 75%. For two assets, this rule gives equal covariance based volatility risk contributions when portfolio volatility is positive. This page displays weighted standalone volatility products and does not calculate covariance based contributions or portfolio volatility.
Should I enter volatility as a percent or decimal?
Enter volatility as a percentage number, such as 60 for 60%, not 0.60. Both inputs use the same percentage units.
Why can’t I enter zero volatility?
Both volatility inputs must be greater than zero. A zero value has no finite inverse, so the calculator does not produce targets for it.
How should the two volatility estimates compare?
Use estimates measured over comparable periods and expressed on an annual basis. The calculator does not select a measurement window or estimate volatility from market prices.
How does correlation affect the interpretation?
Correlation is not an input and the page does not calculate portfolio volatility or covariance based risk contributions. With two assets, inverse volatility weights give equal risk contributions when portfolio volatility is positive. At a degenerate zero volatility portfolio, those contributions are undefined.
Related tools
Risk Parity Allocator compares multi asset risk contributions using a different model. Portfolio Beta Calculator focuses on market sensitivity, while 2 Asset Efficient Frontier explores return, volatility, and correlation assumptions.