Why Swoopr Is Building This
Concentration in capitalization-weighted indexes has reached historically high levels in some markets. A holding that appears diversified by security count can still be heavily exposed to a handful of names or sectors by weight. The Concentration Risk Index makes that dependence measurable and comparable over time.
Swoopr already publishes market tools, a live proprietary Fear and Greed gauge, a sentiment dashboard, macro and regime education, portfolio diagnostics and a market-history library. This product makes one missing question measurable, explainable and reusable across the site.
What It Measures
The model draws from the following evidence families:
- Largest single-holding weight
- Top-five weight
- Top-ten weight
- Herfindahl-Hirschman Index concentration
- Effective number of holdings
- Sector concentration
- Return contribution concentration
- Equal-weight versus capitalization-weight divergence
Scoring Methodology
Each component is normalized to a 0-100 historical percentile score. For a raw value x:
component_score = percentile_rank(x within approved history) * 100
Where a higher raw value represents worse conditions, the score is inverted:
adjusted_score = 100 - component_score
The composite is:
composite = sum(weight_i * adjusted_score_i) / sum(active_weight_i)
Interpretation Bands
| Score range | Label |
|---|---|
| 0-24 | Broadly distributed |
| 25-39 | Low concentration |
| 40-59 | Moderate |
| 60-74 | High |
| 75-100 | Very high |
Bands are communication aids, not natural laws. The reading always shows the numeric value, trend and component contributions.
FAQ
Is Swoopr Concentration Risk Index a buy or sell signal?
No. It measures the degree of concentration in an index, ETF or portfolio. Concentrated markets have performed well and poorly in different historical periods. The score is educational context, not a recommendation.
What is the Herfindahl-Hirschman Index?
The Herfindahl-Hirschman Index, or HHI, is a concentration measure calculated as the sum of squared weight fractions. A higher HHI indicates greater concentration. The effective number of holdings is derived as 1/HHI and represents how many equal-weight holdings would produce the same concentration level.
What is return contribution concentration?
Return contribution concentration measures how much of the total index or portfolio return over a period was generated by a small subset of holdings. An index with 500 holdings can still have 60% of its return generated by 10 names, which return contribution concentration makes visible.
What happens when data are missing?
The affected component is excluded under a predefined rule, coverage falls, and the product shows this to the user. Missing data are not converted to a neutral score.
Does high concentration mean I should reduce exposure?
No. The score describes the structural fact of concentration. Whether that is a risk worth acting on depends on an investor's goals, existing holdings, time horizon and risk tolerance. Swoopr does not provide personalized investment advice.
Methodology Version and Source Provenance
Current Version
| Field | Value |
|---|---|
| Version | v1.0 |
| Effective date | 2026-09-30 |
| Methodology policy | Swoopr Investment: Data & Methodology Policy |
Change Log
| Version | Date | Summary |
|---|---|---|
| v1.0 | 2026-09-30 | Initial published version. Scoring logic, normalization standard, component weights and missing-data rules documented for the first time. |
Source Series and Provenance
The table below lists the primary input series used in this score. Swoopr does not redistribute or relicense third-party data. Source data is retrieved for internal computation only; third-party terms apply to any direct use of those series.
| Component | Primary source | Series / method | Data type |
|---|---|---|---|
| Index concentration | S&P Dow Jones Indices | S&P 500 constituent weights and top-10 weight share | Index composition |
| Sector concentration | S&P Dow Jones Indices | GICS sector weights within major indices | Sector allocation |
| Factor concentration | Composite | Derived from index constituent factor exposures | Style/factor exposure |
| Financial stability context | Federal Reserve | Financial Stability Report concentration commentary | Macro reference |
Limitations
Concentration measures describe current positioning, not future risk magnitude. High concentration can persist during extended trend environments. Constituent weight data subject to rebalancing lags.
All scores are for education and general information only. They do not constitute personalized investment advice. See the Financial Disclaimer and Data & Methodology Policy for full terms.
References
Disclaimer
This score is educational market context only. It is not investment advice, a forecast, or a promise of future returns. Data can be delayed, revised or incomplete. Swoopr publishes the observation timestamp and methodology version with every live reading.