This is the point in the month when I usually discuss comparative metrics — particularly overall correlations with the S&P and the Sharpe Ratio (a measure of return versus risk). Both are getting to be old stories. ACCRE has a Sharpe Ratio of 6.2, compared to the S&P of 3.5 (lifetime since the beginning of the ACCRE fund). No brainer — ACCRE dominates the S&P in terms of risk-adjusted return. As we also know, ACCRE beats the S&P in total absolute return as well, over the life of the fund, and has a lifetime correlation of only 41% (this adding diversification to an overall portfolio). Good stuff. ACCRE does exactly what we want.
Now, on to the fun stuff. I’m a fundamentalist, which is to say, I look at actual stock performance and company fundamentals. However, like most market watchers, I’m not immune to some of the trading statistics. One thing I look at occasionally are 50-day and 200-day moving averages, for ACCRE, the underlying stocks, and the S&P as a whole. After all, there are other traders out there, too, and what they think about these stocks is not unimportant. The results are interesting.
Here, for example, is a chart of ACCRE and the S&P normalized from the first of the year (in other words, a dollar invested on January 1). For the first 10 months of the year, more or less, ACCRE dominated the S&P. That changed around the first of November, and now the S&P has performed somewhat better. Both ACCRE and the S&P have solidly up-trending 200 day moving averages. However, ACCRE’s 50-day moving average has flattened a bit — and even trended downward — since November. Indeed, this picks up the fairly lackluster performance of REITs overall starting in the middle of the 3rd quarter. Of course, if I was a persnickety chartist, I’d say this doesn’t matter yet, and wouldn’t worry unless and until the 50-day line got close to the 200-day line, and we’re nowhere near that. Case in point, the December performance was stellar, and indeed took us back up into record territory. Given the lack of correlation with the S&P, this was really all about real estate rather than simply a market halo effect. Preliminary January results seem to bear out a continuation of this trend.
Anyway, that’s it until the first of February. See y’all then!
Well, we ended December on a high note — but that was true for investments in general. Our ACCRE fund hit an all-time high — a dollar invested in ACCRE at the inception is now worth $1.68. In case you’re curious, this works out to an average annualized rate of return of about 21.5%. By comparison, a dollar invested in the S&P during that same period is now worth $1.37, and if that same dollar went into the S&P U.S. Property Index, it would be worth $1.28.
As usual, we’ll be back mid-month with comparative metrics. Of course, if and as we make portfolio changes, our subscribers will be informed immediately.
Sigh… late, but not forgotten! Just like my Christmas shopping. We hope everyone is having a great holiday season, and looking forward to a super new year.
As usual, our mid-month report will deal with Sharpe Ratios and S&P correlation. The S&P had a fantastic November, from an excess-return perspective. The S&P 500 Sharpe Ratio increased from 0.0265 to 0.0313. That may not seem like much of a gain, but these are daily excess returns, divided by the standard deviation. The S&P standard deviation fell just a bit and excess returns (the average daily return minus the return that would have been earned in the short-term T-bill) jumped by nearly 20%. If you follow any sort of technical trading scheme, November had a real impact in your 50-day (and shorter) moving averages.
I point all this out just to note that the S&P has been surprisingly hard to beat the past few months. Will the broad index keep this up? Well, that remains to be seen.
As noted in our previous report, ACCRE had a solid but not spectacular November. On a risk-adjusted basis, ACCRE continues to out-shine the S&P with a Sharpe Ratio of 0.0606 since inception. Intriguingly, ACCRE’s correlation with the S&P continues to decline, falling to 15.57% in November. This really suggests that the market is increasingly looking at real estate as something very different from the market as a whole.
Notably, moving averages on portfolios are not like those on individual stocks. Traders are price takers for stocks, and so when a stock moves relative to its MA, the trader has to make a “buy-sell-short” decision. With a portfolio, however, we can make adjustments on a more granular level. We made several trades this past week, and our subscribers received an alert with the new portfolio make-up during the trading day.
Best wishes to you all, and we’ll be back right after the first of the year.
Wow… time flies in the holiday season! Normally, I want these end-of-month reports to hit pretty close to the end of the month. However, Thanksgiving and a biz trip to NYC massively upset my schedule. Mea culpa…
Anyway, November was a good month for investments in general, but real estate was bland overall. Note that the S&P Property Index actually retrenched a bit in November, in no small part because there is so much excitement in the S&P 500. We pulled out a nice, positive month, although not quite as aggressive as we’d hoped. I had considered some portfolio rebalancing in November, but when I saw how we were doing relative to the rest of the real estate market, I decided hands-off was the better part of valor.
I’ll be back in a few days with the mid-month report, and as always, subscribers will receive notifications of any portfolio changes. Best wishes for a great December!
As usual, I devote the mid-month report to discuss some of the diversification metrics for ACCRE, which continues to outperform the other indices and continues to enjoy superior risk-hedged returns. Most of the time, I focus on the Sharpe Ratio, the average daily return, minus the risk-free return, all divided by the standard deviation of those daily returns. Generally, the greater the Sharpe Ratio, the more attractive the risk-adjusted returns.
In our case, ACCRE consistently dominates the S&P 500. Measured since the inception of the find, the Sharpe Ratio for ACCRE is 0.06% (this is a daily return) versus 0.02% for the S&P. Recall that this takes volatility into account, as is shown in the following graphic of monthly returns:
ACCRE, the blue line near the middle of the graphic, has been the slow-and-steady performer for the past two and a half years, while the S&P and the S&P Property Index have been all over the map.
By the way, ACCRE as part of a diversified portfolio should have a low correlation with the S&P. Since inception, ACCRE’s correlation has averaged 42%, and was only about 29% for the month of October.
We’ll keep you posted. As usual, subscribers receive notifications of trades and portfolio percentages. We’ve gone a few weeks without a trade, and I suspect some portfolio rebalancing is soon in order.