Mid-month ACCRE notes

I wanted to focus once again on the diversification ACCRE provides in a well-managed portfolio.  As previously, we measure this with the Sharpe Ratio (the average daily excess returns) and the correlation with the S&P.  Both of these metrics continue to be solid — ACCRE’s Sharpe Ratio is 0.07% compared to the S&P’s 0.02%.  This is the average daily return over and above what you would have earned had you simply invested in the T-bill rate, divided by the standard deviation.  It means that not only are ACCRE’s returns superior to the S&P, but we also do that without taking on excess risk.  By the way, the correlation with the S&P continues to be great — 43.2%.

This month, I wanted to look at ACCRE from another perspective.  Like most of you, I have other investments, and like most of you should be, I’m concerned.  One simple way of looking at this is to compare these investments to their 200 day moving averages and 50 day moving averages.   Conventional wisdom suggests that when these two cross or diverge, we have buying or selling signals.  (The charting logic is somewhat more complex than this, but I’m over-simplifying on purpose.)

Mid Month Sept 2019

For comparison sake, I’ve normalized both ACCRE and the S&P =1 as of the date we started (April 1, 2017) and graphed both together.  As you can see, ACCRE really “took off” after early 2018.  More to the point, ACCRE has a solidly up-trending 200 day moving average (the black dotted line) while the S&P is somewhat flat-lined right now (the solid black line).  However, for both, the 50-day moving averages (the thinner dotted and solid lines) are both in “bull” territory right now.  Note that the crossing of the S&P’s 50- and 200- day averages back in the Winter gave an unambiguous selling signal.  However, the corresponding “buy” signal for the S&P this past Spring  actually lagged the market.  For ACCRE, the signals have been positive throughout, although the peak and trough in the 50-day average for ACCRE last summer and this past Spring were very useful indicators.

We’re not really chartists here at ACCRE, and the old Wall Street adage of “never try to catch a falling knife” is very useful in these situations.  However, in hindsight, these signals tell us a lot about what our more fundamental analysis has shown to be true and useful.

 

 

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