Concentration
How much of a portfolio sits in a few positions.
Twenty holdings are not twenty bets if one of them is half the money. The effective number of holdings asks how many EQUAL positions would carry the same concentration.
Formula
Effective holdings = 1 ÷ Σ weight²
Inputs
- weight. Each position's share of the invested money.
How to read it
Ten equal positions give 10; one dominant position pulls it toward 1. On the Portfolio, the 0–100 concentration score reads 0 at one effective holding, 25 at 3, 55 at 8, 78 at 15 and 95 at 30.
How to use it
Shows when a portfolio of many names is really a few bets.
In Kereon
Portfolio. Over the invested holdings (cash left out). The 0–100 concentration score rises with the effective number of holdings.
Whales. How much of a filer's reported value sits in its largest positions.
Also called: concentration, effective holdings, hhi, top 5 weight, largest position, largest single position.