Compare the similarity of holdings for a list of investments in matrix format. To create a new Holdings Similarity chart: on the New menu, point to Charts, and then choose Holdings Similarity.
Change the chart title and calculation settings.
For this calculation setting, we find the common holdings for the two investments. Then we determine the percent each common holding represents in the two investments separately. We then sum these percentages within each investment and divide by the percent of assets considered in the comparison (based on the Compare setting following).
For example, if Portfolio I and Portfolio II have three holdings in common, we can list the proportion the holdings represent in each portfolio.
Portfolio I
Compare Stocks: stocks represent 90% of portfolio holdings
Holding A 2%
Holding B 3%
Holding C 5%
Portfolio II
Compare Stocks: stocks represent 50% of portfolio holdings
Holding A 3%
Holding B 4%
Holding C 1%
In this example, the common holdings A, B, and C represent 10% of Portfolio I (2%+3%+5%). Dividing by 90%, we find the similarity figure for Portfolio I: 11%. This percentage is displayed in the row corresponding to Portfolio I versus the column for Portfolio II.
The common holdings represent 8% of Portfolio II. Dividing by 50%, the similarity figure for this portfolio is 16%. This percentage is displayed in the row corresponding to Portfolio II versus the column for Portfolio I.
In other words, considering the stock holdings of Portfolio I, 11% are held in common with Portfolio II. Considering the stock holdings of Portfolio II, 16% are held in common with Portfolio I.
4Common Holdings Score Calculation
For this calculation setting, we find the common holdings for the two investments. Then we determine the percent each common holding represents in the two investments separately. We discern which is the lesser percentage and then sum these lesser percentages.
For example, if Portfolio I and Portfolio II have three holdings in common, we can list the proportion the holdings represent in each portfolio.
Portfolio I
Holding A 2%
Holding B 3%
Holding C 5%
Portfolio II
Holding A 3%
Holding B 4%
Holding C 1%
In this example, Holding A represents 2% of Portfolio I and 3% of Portfolio II. For the calculation, we use 2% to represent the common holding % of Holding A. Likewise, we take 3% for Holding B and 1% for Holding C. Summing these percentages, the common holdings score for these portfolios is 6%.
Using this calculation setting creates a symmetrical matrix. In our example, 0.06 is displayed in both the row for Portfolio I versus the column for Portfolio II and in the row for Portfolio II versus the column for Portfolio I.
For this calculation setting, we take (1 - Common Holdings Score).
The Active Share measure was developed by professors Antti Petajisto and Martin Cremers.
Chose whether to compare stock holdings, bond holdings, or both stock and bond holdings.
Edit the list of investments used in the chart. Selecting Last month end or Last quarter end for Portfolio date will apply the selection to all investments in the list. Use Specific date to manually adjust the portfolio date for investments individually.
Change the color scheme and colors used to represent intervals. Under the 1-color scheme, two to five intervals are permitted, while even increments from two to ten are allowed under the 2-color scheme. The range for all is 0 to 1.
Use the Similarity dropdown to show or hide the color and numerical similarity value. Edit these settings for investments individually, or for multiple investments at the same time by selecting the investments, and then changing the appropriate settings.