The Health Score is a composite 0–100 score computed across 7 independent dimensions of portfolio quality. Each dimension is scored 0–100, and the overall score is the simple mean of all 7 dimension scores.
Overall Formula
Health Score = (D₁ + D₂ + D₃ + D₄ + D₅ + D₆ + D₇) ÷ 7
where D₁–D₇ are the 7 dimension scores, each independently normalised to 0–100.
Grade Scale
A
85–100
Excellent
A−
75–84
Very Good
B+
65–74
Good
B
55–64
Satisfactory
C+
45–54
Needs Work
C
35–44
Weak
D
0–34
At Risk
Dimension 1
Metric used
Sharpe Ratio
Formula
Sharpe = (Portfolio Return − Risk-Free Rate) ÷ Portfolio Volatility
Score Bands
| Condition | Score | Label |
|---|---|---|
| Sharpe ≥ 1.5 | 90–100 | Excellent |
| Sharpe 1.2–1.5 | 75–89 | Good |
| Sharpe 1.0–1.2 | 60–74 | Acceptable |
| Sharpe 0.5–1.0 | 30–59 | Below average |
| Sharpe < 0.5 | 0–29 | Poor |
Why this matters
Measures how much excess return you earn per unit of risk taken. A Sharpe of 1.0 means you earn 1% extra return for every 1% of volatility — the minimum acceptable standard for an Indian equity portfolio.
Dimension 2
Metric used
Sector Count
Formula
Score = min(sector_count ÷ 7, 1) × 100
Score Bands
| Condition | Score | Label |
|---|---|---|
| 7+ sectors | 100 | Excellent |
| 5–6 sectors | 71–85 | Good |
| 4 sectors | 57 | Moderate |
| 3 sectors | 43 | Concentrated |
| 1–2 sectors | 0–28 | High risk |
Why this matters
Portfolios spread across 7+ sectors (Banking, IT, Pharma, FMCG, Auto, Energy, Infrastructure) have historically shown 20–30% lower volatility than single-sector portfolios during market stress events in India.
Dimension 3
Metric used
Jensen's Alpha vs Nifty 50 (3yr)
Formula
Alpha = Portfolio Annual Return − Nifty 50 Annual Return (3-year)
Score Bands
| Condition | Score | Label |
|---|---|---|
| Alpha > +4% | 90–100 | Strong outperformance |
| Alpha +2% to +4% | 70–89 | Clear outperformance |
| Alpha 0% to +2% | 50–69 | Marginal alpha |
| Alpha −2% to 0% | 30–49 | Slight underperformance |
| Alpha < −2% | 0–29 | Significant lag |
Why this matters
After costs and taxes, most actively managed portfolios underperform the Nifty 50. Consistently beating the benchmark by 2%+ over 3 years indicates genuine stock selection skill rather than luck.
Dimension 4
Metric used
Harvestable Tax Savings (STCG + LTCG)
Formula
Tax saved = Unrealised losses eligible for harvesting × applicable tax rate
Score Bands
| Condition | Score | Label |
|---|---|---|
| < ₹500 harvestable | 90 | Optimised |
| ₹500–₹5,000 | 60 | Minor opportunity |
| > ₹5,000 harvestable | 30 | Action needed |
Why this matters
Leaving tax-loss harvesting opportunities unused is a drag on net returns. STCG tax in India is 20%; LTCG is 12.5% above ₹1.25L. Booking losses before year-end to offset gains is a free improvement to after-tax returns.
Dimension 5
Metric used
Portfolio Beta
Formula
Score = max(0, 100 − |return × 5| × 50 − |beta − 1| × 50)
Score Bands
| Condition | Score | Label |
|---|---|---|
| Beta 0.9–1.1 | 70–100 | Balanced |
| Beta 1.1–1.2 | 50–69 | Slightly aggressive |
| Beta > 1.2 | 0–49 | High market sensitivity |
| Beta < 0.8 | 40–60 | Very defensive |
Why this matters
Beta measures sensitivity to Nifty 50 moves. Beta 1.0 = moves exactly with the market. A portfolio with Beta 1.4 falls 14% when the market falls 10% — manageable in bull markets but painful in corrections like Mar 2020.
Dimension 6
Metric used
Maximum Drawdown (3-year)
Formula
Score = min(50 + max_drawdown × 250, 100)
Score Bands
| Condition | Score | Label |
|---|---|---|
| < −10% drawdown | 75–100 | Strong protection |
| −10% to −20% drawdown | 50–74 | Acceptable |
| −20% to −30% drawdown | 25–49 | High drawdown |
| > −30% drawdown | 0–24 | Severe drawdown |
Why this matters
Max drawdown is the worst peak-to-trough loss over the lookback period. A −30% drawdown on a ₹10L portfolio means it fell to ₹7L at the worst point — psychologically very hard to hold through, often causing investors to sell at the bottom.
Dimension 7
Metric used
Largest Single Position Weight
Formula
Largest position weight = max(holding_value ÷ total_portfolio_value)
Score Bands
| Condition | Score | Label |
|---|---|---|
| Max position < 12% | 90 | Well distributed |
| Max position 12–18% | 65 | Slightly concentrated |
| Max position > 18% | 40 | High concentration |
Why this matters
Concentration risk is often overlooked. If a single stock is 35% of your portfolio, a 10% correction in that one stock causes a 3.5% portfolio loss — before other holdings even move. Keeping positions below 12–15% caps idiosyncratic risk.
Disclaimer:Calsify's Health Score is an analytical tool and is not produced by a SEBI-registered Investment Adviser. All scores, grades, and thresholds are illustrative and educational. They do not constitute investment advice, research, or a recommendation to buy, hold, or sell any security. Consult a SEBI-registered adviser before acting on any analysis.