---
title: "Allocation and allocation method"
description: "Allocation is how capital is divided among what is held; the allocation method is the rule that sets each share, and Fincanva applies it at two levels."
canonical_url: "https://fincanva.com/docs/strategies/allocation-and-allocation-method"
last_updated: "2026-08-02"
md_url: "https://fincanva.com/docs/strategies/allocation-and-allocation-method.md"
---

# Allocation and allocation method

Allocation is how a strategy divides the capital available to it among the things it holds, and the allocation method is the rule that decides each share. The method turns a list of candidates into a list of **weights** — one percentage per item — and those weights are what the backtest actually buys. Fincanva runs the same machinery at two levels: a [Combined](/docs/getting-started/combined) allocates across the strategies it holds, and each [strategy](/docs/getting-started/strategy) allocates across its own instruments.

**Also seen as:** weighting, position sizing, capital split

## Why does allocation happen at two levels?

Because a Combined and a strategy are allocating across different things, so each needs its own rule. The Combined level decides how much of the total capital each member strategy receives; the strategy level then decides how that strategy's slice is split across its own instruments. Which instruments those are comes from the strategy's [universe](/docs/getting-started/universe) — a hand-picked basket, or whatever a screener returns from its [seed universe](/docs/strategies/seed-universe).

The two levels are independent layers: Fincanva applies both, one after the other, and never flattens them into a single list of instrument weights. You read a Combined's split across its strategies and each strategy's internal split as two separate answers. A standalone strategy only ever uses the strategy level.

## Which allocation methods can I choose?

Eleven methods are available to a strategy; six of those eleven are also available to a Combined.

| Method (as the app labels it) | Across strategies in a Combined | Across instruments in a strategy |
|---|---|---|
| [Equal Weights](/docs/strategies/equal-weights) | yes | yes |
| [Fixed Allocation](/docs/strategies/fixed-weights) | yes | yes |
| [Inverse Volatility](/docs/strategies/inverse-volatility) | yes | yes |
| [Ranking-Based](/docs/strategies/ranking-based) | yes | yes |
| [Risk Parity](/docs/strategies/risk-parity) | yes | yes |
| [MPT (Markowitz)](/docs/strategies/modern-portfolio-theory) | yes | yes |
| [Market Cap](/docs/strategies/market-cap-weighted) | no | yes |
| [Min Correlation](/docs/strategies/min-correlation) | no | yes |
| [Beta Neutral](/docs/strategies/beta-neutral) | no | yes |
| [Mimicking](/docs/strategies/mimicking) | no | yes |
| [Floating](/docs/strategies/floating) | no | yes |

In prose: **Equal Weights, Fixed Allocation, Inverse Volatility, Ranking-Based, Risk Parity, and MPT (Markowitz)** work at both levels. **Market Cap, Min Correlation, Beta Neutral, Mimicking, and Floating** work only inside a strategy, across its instruments — they are not offered when a Combined splits capital across its member strategies.

Each method page covers its own rule; which of them read history and which do not is set out in [Calculation window](/docs/strategies/calculation-window). How a Combined's split across its member strategies differs from a strategy's split across instruments is covered in [Combined weighting](/docs/strategies/combined-weighting).

## Does a method I am not using still affect my results?

No — only the method you have selected executes, and every other method's settings are inert. Each level holds one selected method at a time, and switching to a different method resets the previous method's own parameters: the picker warns "The current method’s specific parameters will be reset." before it applies the change. Nothing a non-selected method was configured with reaches the backtest.

## What do all allocation methods have in common?

Every method, at either level, shares the same three pieces of vocabulary.

- **Weights.** A method's output is one weight per item, as a share of the capital being allocated. Weights are relative: you can enter raw numbers that do not add up to 100, and they are standardized so the allocated capital is fully used. A negative weight means a short position, which only the methods that support it can produce — see [Direction](/docs/strategies/direction-long-only-long-short-short-only).
- **Rebalance interaction.** The method recomputes its weights at each [rebalance](/docs/backtesting/rebalance) date, and the strategy trades back to them. Between rebalance dates the weights drift with prices. [Floating](/docs/strategies/floating) is the deliberate exception: it lets weights drift and realigns them on its own schedule.
- **Calculation window.** Methods that read history — volatility, correlation, beta, ranking — read it over a window the app calls **In-sample**, in months. Its hint reads: "Historical window used by the active method for volatility, correlation, beta, and similar calculations. Default 12." Equal Weights, Fixed Allocation, Market Cap, and Floating do not use it — see [Calculation window](/docs/strategies/calculation-window).

Separately from the method, each level carries one dial for *how much* capital is put to work: [**Leverage**](/docs/backtesting/leverage) inside a strategy, and the [invested portion](/docs/backtesting/invested-portion) at the Combined level — see [Invested capital and the cash reserve](/docs/strategies/invested-capital-and-cash-reserve).

## Defaults in Fincanva

- **Equal Weights** is the starting method at both levels, so a new strategy or Combined splits capital evenly until you change it.
- The In-sample calculation window defaults to **12 months**, and Leverage defaults to **1.00** — no leverage.
- Each level holds an allocation profile per risk regime: **Risk-On**, used while no risk condition is firing, and **Risk-Off**, used while one is. A strategy with no [risk condition](/docs/strategies/risk-conditions) configured has only the one profile, and the app says so: "No Risk conditions configured — this allocation runs at all times."
- Risk-On and Risk-Off each pick their own method, so a strategy can allocate one way normally and another way defensively.
- With a single instrument there is nothing to divide: "With one instrument and no Risk-Off split, 100% of capital goes to that instrument."

## Worked example

A strategy holds four instruments — A, B, C, and D. Under **Equal Weights** the method returns 25% each, and the backtest buys a quarter of the strategy's capital in each. You switch the same strategy to **Fixed Allocation** and enter 40, 30, 20, 10; the method now returns 40% / 30% / 20% / 10%, so A gets four times what D gets. Same instruments, same dates, same rebalance cadence — only the allocation method changed, and the results differ because the capital was split differently.

Now put that strategy into a Combined alongside two others and leave the Combined on Equal Weights. The Combined gives each of its three member strategies one third of the total capital; inside its third, our strategy still splits 40 / 30 / 20 / 10. Instrument A therefore ends up with 40% of one third — about 13.3% of the Combined's capital. That is the two levels, applied in order.