Overview

Risk Assessment analyzes essential metrics for stocks and positions. It reports volatility, beta versus SPY, 95% and 99% VaR, max drawdown, and Sharpe ratio, with optional dollar VaR when a position size is provided.

How This Skill Works

The tool runs a risk.py script with a SYMBOL and optional flags to compute metrics. It outputs a JSON object containing volatility, beta, var_95, var_99, max_drawdown, sharpe_ratio, and position_risk if a size is provided, using numpy and yfinance under the hood.

When to Use It

• Assess a stock's historical volatility to gauge risk level.
• Evaluate beta against SPY to understand market sensitivity.
• Get daily VaR estimates (95% and 99%) for risk budgeting.
• Estimate maximum drawdown over a selected period to plan exits.
• Compute position_risk when comparing different dollar-sized allocations.

Quick Start

1. Step 1: Choose SYMBOL and optional period and position-size.
2. Step 2: Run the tool: uv run python scripts/risk.py SYMBOL [--period PERIOD] [--position-size SIZE].
3. Step 3: Review the JSON output and interpret volatility, beta, VaR, and drawdown.

Best Practices

• Choose a period (1mo, 3mo, 6mo, 1y) that matches your horizon.
• Provide a realistic position-size to obtain dollar VaR.
• Use VaR alongside volatility and Sharpe ratio for context.
• Compare metrics to a benchmark like SPY to gauge relative risk.
• Treat VaR as probabilistic, not a guaranteed loss.

Example Use Cases

• Compute 1y volatility and beta for AAPL with a $50k position to inform sizing.
• Estimate 3mo VaR and max drawdown for MSFT to assess downside risk.
• Determine beta vs SPY for a new energy stock before adding to a portfolio.
• Run risk assessment for a diversified tech basket to compare risk profiles.
• Use 1y VaR and Sharpe ratio to decide allocation between two equities.

Frequently Asked Questions