MCTR and ACTR

CFA Level II Portfolio Management
#1

hello,

im having a bit of hard time interpreting the formulas of MCTR and ATR
i know they both measure how much security contributes to the total risk

So if we say that we have a higher MCTR for XYZ. Does it mean XYZ contributes relatively more to the total risk of the portfolio? and ACTR is instead how much XYZ contributes to the total risk if we change the asset weight of this security?

#2

MCTR is systematic risk (= Beta * SD of portfolio). ACTR is like how much of that systematic risk you are going to use in your portfolio.

As an analogy, MCTR is like glass’s capacity. ACTR is like water filled in the glass.

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#3

I am not sure if I got your analogy

#4

No worries. I made a correction in what i typed.

Let me know if you are not able to understand.

MCTR is systematic risk.