Measuring Portfolio Concentration: The Metrics That Actually Matter in 13F Analysis

#finance #data #python #investing

Why Concentration Matters

Portfolio concentration is one of the most predictive signals in institutional holdings data. It tells you:

How much a manager trusts their top ideas
Whether they're diversifying or concentrating over time
How different they are from a passive index

Key Metrics

def concentration_metrics(holdings):
    total = sum(h['value'] for h in holdings)
    sorted_holdings = sorted(holdings, key=lambda x: x['value'], reverse=True)

    return {
        'top1_weight': sorted_holdings[0]['value'] / total,
        'top5_weight': sum(h['value'] for h in sorted_holdings[:5]) / total,
        'top10_weight': sum(h['value'] for h in sorted_holdings[:10]) / total,
        'position_count': len(holdings),
        'herfindahl_index': sum((h['value'] / total) ** 2 for h in holdings)
    }