Contrast Active Share with active risk and relate each measure to the strategy a manager follows

Active Share measures how far holdings differ from the benchmark: Active Share = ½ × Σ |portfolio weight − benchmark weight|, ranging from 0 for an index copy to 1 for no overlap. Active risk (tracking error) is the standard deviation of excess returns and depends on how correlated the active bets are. A diversified stock picker with many small, unrelated bets has high Active Share but modest active risk. A factor or sector bettor who holds index-like stocks within big sector tilts has lower Active Share but high active risk. Concentrated stock pickers are high on both; closet indexers are low on both. The trap is treating either measure as a full description of how active a manager is.