Market cap is the allocation method that sizes each instrument in proportion to its market capitalization — the total market value of a company's shares. A company worth ten times more than another receives ten times the weight, so the largest holdings dominate the allocation. It is the weighting convention most broad market indices use.
Also seen as: market cap weighted, cap weighted, capitalization weighting
How is a market-cap weight calculated?
Each instrument's weight is its own market capitalization divided by the total capitalization of all the instruments being allocated across; because the weights are shares of a total, they always add up to the whole capital being allocated.
- instrument i's weight
- instrument i's own market capitalization
- the sum of the capitalizations of all N instruments in the allocation
How does Fincanva handle it?
The app labels the method Market cap and describes it as "Instruments are weighted by market capitalization".
Included from Starter upwards. See what each plan includes.
- It has no parameters: the weights follow each instrument's market capitalization, so there is nothing to set.
- It is available only inside a strategy, across its instruments. A Combined does not offer it when it splits capital across its member strategies.
- It does not use the In-sample calculation window: it reads current capitalizations rather than a window of history.
- Weights are recomputed at each rebalance date, so as companies grow or shrink relative to each other their shares move with them.
What does it look like in practice?
A strategy holds two stocks. One has a market capitalization of $500 billion; the other, $50 billion — a 10:1 ratio. The total is $550 billion, so the weights are 500 ÷ 550 = 90.9% and 50 ÷ 550 = 9.1%. On $100,000 of strategy capital that is about $90,900 in the large company and $9,100 in the small one.
Compare that with Equal weights over the same two stocks, which would put $50,000 in each. If the small company then doubles while the large one is flat, the equally weighted version gains roughly 50% and the cap-weighted version roughly 9% — the same two instruments, the same period, a different allocation method.
What counts as a good value?
There is nothing to configure, so what matters is the shape of the result: cap weighting concentrates capital in the largest holdings. A handful of very large companies can absorb most of the allocation while the rest of the list receives a fraction of a percent each, which means the strategy's outcome is driven mostly by those few names. That is a property of the method, not a fault — but it is why a cap-weighted allocation and an equally weighted one over the same instruments can behave very differently. Read the result alongside a concentration check, such as how much of the capital the top few weights hold.
Fincanva describes how this method behaves; it never recommends an allocation method or tells you which weighting to run.