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Next filing · Form 10-Q · Q2 2026 · 54 daysFactor Research · Part 2 published: risk structure in 13F filings across five allocator stylesAPI Update · AOM portfolio chains — single snapshot call for multi-step analyze flowsAPI Update · POST /api/snapshot — canonical JSON portfolio snapshotPart 3 · The One Manager Skill That PersistsPart 1 · One Position, Four BetsNext filing · Form 10-Q · Q2 2026 · 54 daysFactor Research · Part 2 published: risk structure in 13F filings across five allocator stylesAPI Update · AOM portfolio chains — single snapshot call for multi-step analyze flowsAPI Update · POST /api/snapshot — canonical JSON portfolio snapshotPart 3 · The One Manager Skill That PersistsPart 1 · One Position, Four Bets
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Concept · Stock-level risk (bottom-up)

Variance decomposition

Splitting a stock's variance into shares attributable to each factor and the residual. Sums to 1.0.

In depth

The shares are orthogonal, so they sum to 1.0 within tolerance — no double-counting. This is the single-stock version of the portfolio decomposition.

Formula

1.0 ≈ l3_market_er + l3_sector_er + l3_subsector_er + l3_residual_er

Compute it with the API

GET /api/l3-decomposition

# pip install riskmodels-py
client.get_metrics("NVDA", as_dataframe=True)[["l3_market_er","l3_sector_er","l3_subsector_er","l3_residual_er"]]

Full API docs ↗

In the methodology

Explained risk: variance decomposition →

Referenced by (0)

No working paper references this concept yet.

Related concepts

Factor modelBeta (β)ResidualIdiosyncraticAlpha (α)Hedge ratioReturn attribution
← Hedge ratioStock-level risk (bottom-up) · 7 / 8Return attribution →
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