Performance
Alpha
Definition
A measure of an investment's performance relative to a benchmark index. Positive alpha means the investment outperformed the benchmark; negative alpha means it underperformed. A fund with an alpha of 2 returned 2% more than its benchmark.
Related Terms
Benchmark
A standard against which investment performance is measured. The S&P 500 is the most common benchmark for US stocks. Fund managers are evaluated on their ability to beat their benchmark.
Beta
A measure of a stock's volatility relative to the overall market. A beta of 1 means the stock moves with the market. A beta greater than 1 means more volatile; less than 1 means less volatile. A beta of 0 means no correlation.
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