In professional gambling and trading, putting all your eggs in one basket is a recipe for disaster. This is why smart bettors diversify: they bet on sports, play poker, and invest in crypto simultaneously.
But does adding more strategies actually reduce your risk? Not always. If your strategies are highly correlated (they move up and down together), you aren’t diversifying — you are just amplifying your risk. Our Portfolio Variance Calculator allows you to build a Covariance Matrix for up to 3 different assets or strategies, showing you mathematically how to construct a bulletproof bankroll.
Portfolio Variance Calculator
Covariance MatrixHow to Use the Calculator
This tool adapts Modern Portfolio Theory (MPT) for gamblers and traders. Here is how to measure your combined risk:
- Enter Total Bankroll: The combined capital you have across all sites, wallets, or strategies.
- Select Number of Assets: Choose 2 Assets (e.g., Sports Betting + Poker) or 3 Assets (e.g., Sports + Crypto + Slots).
- Define the Assets:
- Weight (%): How much of your bankroll is allocated to this strategy? (e.g., 50% / 50%).
- Volatility (SD %): How risky is this specific strategy? (e.g., Cash Game Poker might be 10%, while Memecoins might be 80%).
- Set the Correlation Matrix (-1 to +1): This is the secret sauce.
- +1.0: They move perfectly together (High Risk).
- 0.0: They are completely unrelated (Good Diversification).
- -1.0: They move in opposites (Perfect Hedge).
- Analyze the Benefit: The “Diversification Benefit” bar shows exactly how much risk you eliminated simply by combining these strategies.
Real-World Examples: The Power of Correlation
Why does correlation matter? Let’s look at three scenarios using a $10,000 bankroll split 50/50 between two strategies.
Example 1: The “False Diversification” (Correlation +0.9)
You bet on Bitcoin and Ethereum. Both have high volatility (SD 60%).
- The Problem: When Bitcoin crashes, Ethereum usually crashes too. The correlation is nearly +1.0.
- The Result: Your Portfolio Variance remains massive (~58%). You gained almost no benefit from splitting your money. The calculator will show “Low Diversification Benefit.”
Example 2: The “True Diversification” (Correlation 0.0)
You bet on NFL Spreads and play Online Poker.
- The Setup: The outcome of the Super Bowl has zero impact on your Poker hands. The correlation is 0.0.
- The Result: The math works magic here. Even if both activities are risky, the combined Portfolio Volatility drops significantly (often by ~30%). One strategy’s winning days will smooth out the other’s losing days.
Example 3: The “Hedge” (Correlation -1.0)
You bet on Team A to Win at Bookmaker X and Team B to Win at Bookmaker Y.
- The Setup: If one wins, the other must lose. Correlation is -1.0.
- The Result: Your variance drops to near zero. This is the mathematical basis of Arbitrage betting.
Frequently Asked Questions (FAQ)
What is a Correlation Coefficient?
It is a number between -1 and +1 that describes how two assets move in relation to each other.
- +1: Perfect synchronization (Risk is additive).
- 0: No relationship (Risk is reduced).
- -1: Perfect opposition (Risk is cancelled out).
How do I calculate the Volatility (SD) of my strategy?
For sports betting, you can use our Variance Calculator. For poker, tracking software (like Holdem Manager) provides your Standard Deviation in bb/100. For crypto, you can look up the historical 30-day volatility.
Why is Portfolio Variance lower than the average risk?
This is the “Free Lunch” of diversification. Unless assets are perfectly correlated (+1.0), the bad luck of one asset will occasionally be offset by the good luck of another. This reduces the magnitude of your total bankroll swings without necessarily reducing your Expected Value (EV).