Risk Calculator
If you want to determine the best investment opportunity from two or more options, this risk calculator can help you find the most precise investment plan for you.
Statistically, risk is defined as the probability of a certain event or outcome. It indicates the future possibility of the earning or outcome from a certain investment. In mathematical form, The product of probability and loss is known as a risk in statistics. Whereas the probability relates to the chances of failure and, on the other hand, loss refers to the damage investors have to bear at the point of failure.
Table of Contents
Formula of Risk Calculator
If you want to evaluate the risk instantly, you can use our calculator, or to find it manually, you can use the formula listed below:
Risk = probability * loss
Note:
To calculate midrange, you can use our Midrange Calculator.
Example
For a more precise understanding of how to calculate risk, let us have an example below:
Suppose an investor has two investment opportunities. The first opportunity required investment with no return in terms of capital (loss) of $1000. Still, the failure probability is around 12%, whereas, in the second opportunity, the investment with no return in terms of capital (loss) is around $2000, but the failure probability is around 7% only. Find out the best opportunity with less risk for an investor.
Given data
1st opportunity:
Loss = $1000
Failure probability = 12%
2nd opportunity:
Loss = $2000
Failure probability = 7%
To Find
Investment with less risk = ?
Solution
To find the work, you can use the formula listed below:
Risk = probability * loss
Putting values in the formula:
1st opportunity:
Risk = (12%) * ($1000) = $120
2nd opportunity:
Risk = (7%) * ($2000) = $140
So from the above results, we can see that the 1st opportunity has a low-risk factor.
How to use the Risk Calculator?
The steps to use the risk calculator are as follows:
Step 1: Enter the value of loss in the first required input.
Step 2: Enter the value of failure probability in the second required input.
Step 3: The calculator will automatically display an answer on the screen.
Calculator use
To find out the risk-free investment, you can use our free online risk calculator. You can use our tool before investing in real estate, trading, stocks, or any other type of investment to check risk factors.
