Value at Risk (VaR) answers one blunt question: on a normal bad day, how much could I lose? A 1-day 95% VaR of $500 means most days your loss should stay under $500 — and the worst 1-in-20 days could exceed it.
The simplest version scales a stock's volatility. Pick a confidence level (95% is common), find the matching point on the return distribution (about 1.65 standard deviations below average for 95%), and multiply by your position size. Example (illustrative): holding $10,000 of a stock whose daily returns have a 2% standard deviation, the 95% 1-day VaR is roughly 1.65 × 2% × $10,000 = $330 — typical days stay under about $330, with the worst ~5% exceeding it.
VaR tells you the threshold of the bad tail, not how bad it gets beyond it. A 95% VaR of $330 says nothing about whether the worst 5% of days lose $400 or $4,000 — and those rare huge losses are what wreck accounts. That is why VaR is best read next to maximum drawdown, the actual worst peak-to-trough loss.
Value at Risk is a standard public statistic, not a Quantustik edge. Our forecasts express downside through a full calibrated confidence band and a drawdown estimate, but VaR is a useful lens for sizing a position against what you can afford to lose on an ordinary bad day. None of this is investment advice.
On about 95% of days your loss should be smaller than $500, and on the worst roughly 1-in-20 days it could be larger. It is a threshold for a normal bad day, not a worst-case cap.
Because it says nothing about how bad losses beyond the threshold get — the rare, account-wrecking tail — and it assumes the future resembles the past, which fails in crises.
A lower VaR means less expected downside for the position size — but you can lower VaR simply by holding less, so read it relative to position size and your own risk tolerance.
Browse all S&P 500 tickers to see this metric applied to individual companies.
Educational research only — not investment advice.