Understanding how Equily detects shared holdings between your ETFs and mutual funds, and calculates their impact on your EPR diversification factor.
Fund overlap occurs when multiple funds in your portfolio — whether ETFs or mutual funds — hold the same underlying stocks. Even though you may hold different funds with different names, they might invest in many of the same companies.
Example: A total US market ETF (like VTI) and an S&P 500 mutual fund both hold Apple, Microsoft, Amazon, and other large US companies. The S&P 500 represents approximately 80% of the total US market by capitalization, resulting in significant overlap.
Equily analyzes both ETFs and mutual funds, examining the actual holdings of each fund in your portfolio to calculate how much of your investment is in stocks held by multiple funds.
When multiple funds hold the same stocks, your portfolio may be less diversified than it appears. Understanding overlap helps you see your effective diversification rather than just counting the number of funds you hold.
Effective vs Nominal Diversification
Holding 5 funds doesn't mean you have 5x the diversification. If those funds share significant holdings, your effective exposure to unique securities may be much lower than expected.
Correlation Effect
Overlapping holdings tend to move together. When two funds hold the same stocks, gains and losses in those stocks affect both positions simultaneously. This correlation is factored into the EPR diversification assessment.
Concentration Amplification
If Apple represents 7% of Fund 1 and 5% of Fund 2, and you hold both, your combined Apple exposure is higher than either fund alone would suggest. This can amplify single-stock concentration.
EPR calculates your effective diversification by analyzing actual holdings overlap, providing a more accurate picture than simply counting funds.
Fund overlap analysis depends on the availability and completeness of holdings data. There are some important limitations to be aware of:
Partial Holdings Data
Some funds only publish their top 10 or top 25 holdings publicly. When this is the case, Equily displays a coverage percentage indicator (e.g., "~60% coverage") so you know the analysis is based on partial data.
Update Frequency
ETF holdings are typically updated daily or weekly. Mutual fund holdings may be updated less frequently — often monthly or quarterly — depending on the fund provider. The analysis reflects the most recent available data.
Data Indicators
When analyzing your portfolio, Equily shows the number of holdings analyzed and the data date so you can assess the completeness and freshness of the analysis.
Despite these limitations, overlap analysis provides valuable insight into your portfolio's effective diversification.
For each pair of funds (ETFs or mutual funds) in your portfolio, Equily:
Retrieves the underlying holdings of each fund from financial data providers.
Compares holdings across funds to find stocks that appear in both.
For each shared holding, calculates the overlap contribution using the minimum weight approach. If Apple is 7% of Fund 1 and 5% of Fund 2, the overlap contribution is 5%.
Multiplies the overlap by your allocation to each fund to determine the portfolio-level impact.
The portfolio impact represents what percentage of your total portfolio is invested in stocks held by both funds:
Portfolio Impact = (Allocation to Fund 1 + Allocation to Fund 2) × Overlap %
Example:
Fund overlap affects the Diversification factor in your EPR score. Here's how the impact levels work:
EPR calculates your effective diversification — accounting for overlap between funds rather than just counting the number of funds you hold.
Some fund combinations have structural overlap due to how they're constructed:
Total Market + Large Cap
Total market funds (like VTI or FSKAX) contain all the stocks in large cap funds (like VOO or VFIAX). The S&P 500 represents approximately 80% of the total US market by capitalization.
Global + Regional
Global funds (like VT or VTWAX) contain stocks from regional funds. The overlap varies based on regional allocation within the global fund.
Sector + Broad Market
Sector funds (like XLK or FSCSX) hold stocks that are also in broad market funds. The overlap depends on the sector's weight in the broader index.