Calculate weights, HHI, and effective positions
Add the entered values to obtain total portfolio value. Each weight equals a position value divided by that total. Fractional HHI equals the sum of squared weights; multiply by 10,000 for the point scale. Effective positions equal 1 ÷ fractional HHI. Use nonnegative values and a positive total. The measure describes a long-only value allocation; negative positions cannot be inserted as ordinary weights without changing the meaning of this model.
Compare an uneven three-position portfolio
For hypothetical values of 50, 30, and 20, weights are 0.50, 0.30, and 0.20. Squaring and adding gives 0.25 + 0.09 + 0.04 = 0.38. HHI on the point scale is 3,800, and effective positions are approximately 2.63. Although there are three holdings, concentration is equivalent under this measure to roughly 2.63 equally weighted positions. Five equal positions would instead have HHI 0.20 and effective count 5.
Define positions consistently before comparing
Combining several holdings into one category generally changes the index. For issuer concentration, combine exposures to the same issuer before entering values; for instrument concentration, keep them separate. Splitting one economic exposure across multiple rows can make the portfolio look more distributed without changing its underlying risk. Use values from a consistent date and currency. Zero-value rows do not affect HHI, while an all-zero input has no defined portfolio weights.