How many things does your portfolio depend on?
Paste your positions with their amounts. No sign-up, no market prices, nothing stored.
Example: this is what the result looks like.
4,1 effective positions out of 6
- The biggest one
- 34,6%Bitcoin
- The first three
- 78,0%
- HHI index
- 0,242high
How it is calculated
HHI index
It is the sum of the weights squared, with weights as fractions. Four positions of 25% give 4 × 0.25² = 0.25. A single position gives 1. The higher, the more concentrated. It is the same index competition authorities use to measure markets, and the European Commission treats a market as concentrated from 0.20.
Effective positions
It is 1 divided by the HHI, and it is the useful translation of the index: how many equal positions would behave like your portfolio. If you hold forty lines but one weighs 80%, effective positions come out around 1.5. This number is what dismantles the illusion of holding many lines.
Why the weight of the biggest one is not enough
Two portfolios can share the same biggest position and be concentrated very differently: 38% with another 62% in one more position is not the same as 38% plus sixty positions of 1%. The weight of the first does not tell them apart; the HHI does.
What this does NOT measure
It does not measure whether the positions move together. Ten different S&P 500 ETFs give a very low concentration and are the same bet. Nor does it say anything about the quality of what you hold. Concentrating is not a mistake (some do it on purpose and do well): it means you depend on few things.
The same thing, but on its own and every day
Arvenyx works this out on your real positions, with prices kept up to date, and alerts you when one goes past the limit you chose. It also looks at concentration by platform, meaning which place you depend on, and the share you hold in assets with no investor protection.
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