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Market Intelligence › Basic Terminologies
The difference between having different names and having different risks
Published by The Retail Trader · JUL 24, 2026 · Risk Management
The portfolio shows ten names and it feels like the risk has been spread. If those ten depend on the same thing, you do not have ten positions, you have one big position.
Two assets moving up and down together is correlation. Very high correlation means both are reacting to the same factor.
Diversification works only when the holdings depend on different factors. Having different tickers is not enough.
These combinations often look different but move alike:
• Four stocks of the same sector — even if their size is different.
• Different banks that run on the same rate cycle.
• Two mutual funds whose top holdings are almost the same.
• A stock and its sector's index fund together.
Once a year, group your top holdings by theme, not by sector. Often you find that the whole portfolio stands on just two or three ideas — and a bad day hits them all together.
This article is for educational purposes only — it is not a buy or sell recommendation, it makes no claim of guaranteed returns, and it is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.