What Is What Is a Portfolio Health Score and How to Improve Yours?
A portfolio health score is a composite metric that evaluates multiple risk dimensions simultaneously, typically including diversification, concentration, volatility, correlation risk, and liquidity. Scores above 80 indicate strong portfolio construction; scores below 50 suggest significant vulnerabilities.
Why It Matters
Health scores are superior to single-metric evaluation because they capture the interaction between different risk factors. A portfolio with low volatility but high concentration may look safe until a sector-specific event triggers large losses.
How LyraIQ Approaches This
LyraIQ's health score combines six sub-scores: Diversification (0-100), Concentration (0-100), Volatility Control (0-100), Correlation Risk (0-100), Quality & Trust (0-100), and Fragility (0-100). Each sub-score is computed deterministically from market data, and the composite is weighted based on historical predictiveness.
Practical Steps
- Calculate current health score using multiple risk dimensions
- Identify the lowest-scoring sub-dimension for targeted improvement
- Reduce concentration in the highest-weighted holding
- Add uncorrelated assets to improve diversification score
- Monitor health score monthly and track improvement trends