InsidersTradesSigma
Performance & Risk Metrics
The marginal contribution of an individual position or portfolio component to the total Value at Risk, measuring how much that component drives tail risk exposure across the portfolio.
Component VaR splits total portfolio VaR into the share contributed by each holding. Its defining property is that the components add up exactly to the portfolio VaR, so it answers where the risk lives. Unlike Marginal VaR, which measures sensitivity to a one-unit change, Component VaR attributes the absolute risk of a position as it currently sits in the book.
This makes Component VaR the natural tool for risk budgeting: a position can be small in dollar terms yet dominate the risk budget if it is volatile or highly correlated with the rest. Watching the components over time shows when one name or theme is quietly becoming the portfolio's main source of tail risk.
Formula