A portfolio may have exposure to different stocks either directly or indirectly. This risk score quantifies how concentrated the exposure to stocks
Imagine you are a soccer coach, and you have a team of players. Each player contributes differently to the team. Some players are superstars who score lots of goals, while others are supportive, playing defense or passing the ball.
Now, think of each player's contribution as their "weight." The superstar players who score a lot have a heavy weight, while the players who don't score as much have a lighter weight.
The Concentrated Risk score is like a measure of how much your team relies on just a few superstar players. If only one or two players are doing most of the scoring, then your team's success is heavily concentrated in those players. That's risky because if those players get injured or have an off day, your team might not do very well. This would be a high Concentrated Risk score.
On the other hand, if your team's scoring is spread out among all the players, then it's not as risky. Even if one player has an off day, there are plenty of others who can pick up the slack. This would be a low Concentrated Risk score.
Now imagine lining up your players from the highest-scoring to the lowest-scoring. If you find that only a few of your top players are responsible let's say for 60% of your team's total scoring, then you have a high Concentrated Risk score. Your team's success is heavily concentrated in those top players.
If it takes a lot of your players to make up half of your team's total scoring, then you have a low Concentrated Risk score. Your team's success is well distributed among all your players.
In this analogy, the Concentrated Risk score acts like a warning sign or a measure of your team's balance. It shows how much your team's success is dependent on a few players. The higher the score, the more your team relies on a few players, and the higher the risk.