What should my personal rule be for the maximum number of correlated positions I hold at the same time?

How this is calculated

• Correlated positions, like two stocks in the same sector or a stock plus options on the same underlying, don't diversify risk the way unrelated positions do. A move against one often moves against all of them together.
• This card converts your stated cap on combined correlated exposure into an actual maximum position count, based on your typical position size.
• The max count is rounded down and floored at 1, since a cap smaller than one typical position doesn't produce a usable rule.
• Pair this rule with the correlated position risk calculator below to check combined dollar risk before adding a second or third related position, not just size the new trade in isolation.