Equal Weights

Also seen as: equal weighting, equally weighted, 1/N

Fincanva describes how this method behaves; it never recommends an allocation method or tells you which split to run. Fincanva provides no financial advice — see Is this financial advice?.

How is an Equal Weights allocation calculated?

Each item's weight is one divided by the number of items.

where $w_i$ is the weight given to item $i$ and $N$ is the number of items being allocated across — instruments, when a strategy allocates; member strategies, when a Combined allocates. Every weight is identical, and the weights add up to the whole capital being allocated.

What counts as a good value?

There is nothing to tune, so the question becomes what an equal split does: it spreads capital without any view on which item is more attractive, so no single holding dominates by construction. That evenness cuts both ways — a small, volatile holding carries the same capital as a large, stable one, so an equally weighted strategy can be more exposed to its smallest holdings than a size-based method would be. Read it alongside a risk measure such as volatility or max drawdown.

Defaults in Fincanva

• Equal Weights is the method a new strategy and a new Combined start on, at both levels.
• It has no parameters at all: the method's card carries no settings, because 1/N leaves nothing to choose.
• It does not use the In-sample calculation window, because it reads no price or fundamental history.
• Weights are recomputed at every rebalance date, so holdings that drifted apart between rebalances are brought back to an even split.
• It is available both across a strategy's instruments and across a Combined's member strategies.

Worked example

A strategy holds four instruments: AAPL, MSFT, JNJ, and KO. Under Equal Weights, N = 4, so each weight is 1 ÷ 4 = 0.25 — 25% each. On $100,000 of strategy capital that is $25,000 per instrument, regardless of company size, price, or past performance.

Three months later AAPL has doubled and KO is flat, so the actual weights have drifted to roughly 40% / 20% / 20% / 20%. At the next rebalance date Equal Weights recomputes 1/4 again, and the strategy sells part of AAPL and tops up the rest to return to 25% each. A Combined holding three strategies works the same way: N = 3, so each strategy receives one third of the Combined's capital.