Direct Answer
Swoopr Concentration Risk Index is a transparent concentration score using top-weight shares, HHI/effective holdings, sector concentration and contribution-to-return concentration. It is designed to answer one narrow question: How dependent is an index, ETF or portfolio on a small number of holdings or themes? The output is educational market context, not a forecast, recommendation, or promise of future returns.
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.
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.