What does a negative alpha mean?

What does a negative alpha mean?

Key Takeaways. Alpha is an important tool for many investors when trying to figure out if their investments are doing well. A positive alpha indicates the security is outperforming the market. Conversely, a negative alpha indicates the security fails to generate returns at the same rate as the broader sector.

Is a negative beta good or bad?

Negative beta: A beta less than 0, which would indicate an inverse relation to the market, is possible but highly unlikely. Some investors argue that gold and gold stocks should have negative betas because they tend to do better when the stock market declines.

What does a β of 1.3 mean?

Definition: Beta is a numeric value that measures the fluctuations of a stock to changes in the overall stock market. For example, if a stock’s beta value is 1.3, it means, theoretically this stock is 30% more volatile than the market.

What does a stock’s alpha mean?

the active return

What does a negative unstandardized beta mean?

If the beta coefficient is negative, the interpretation is that for every 1-unit increase in the predictor variable, the outcome variable will decrease by the beta coefficient value.

What is a good Sharpe ratio?

Usually, any Sharpe ratio greater than 1.0 is considered acceptable to good by investors. A ratio higher than 2.0 is rated as very good. A ratio of 3.0 or higher is considered excellent. A ratio under 1.0 is considered sub-optimal.

What does a negative Sharpe ratio mean?

If the analysis results in a negative Sharpe ratio, it either means the risk-free rate is greater than the portfolio’s return, or the portfolio’s return is expected to be negative.

What is a good Treynor measure?

When using the Treynor Ratio, keep in mind: For example, a Treynor Ratio of 0.5 is better than one of 0.25, but not necessarily twice as good. The numerator is the excess return to the risk-free rate. The denominator is the Beta of the portfolio, or, in other words, a measure of its systematic risk.

What Sortino ratio is best?

2 and above

What is Alpha in mutual fund?

Alpha is a measure of an investment’s performance on a risk-adjusted basis. It takes the volatility (price risk) of a security or fund portfolio and compares its risk-adjusted performance to a benchmark index. An alpha of 1.0 means the fund has outperformed its benchmark index by 1%.

What is an Omega chart?

The Omega ratio is a risk-return performance measure of an investment asset, portfolio, or strategy. It was devised by Con Keating and William F. Shadwick in 2002 and is defined as the probability weighted ratio of gains versus losses for some threshold return target.

What does a high Sortino ratio mean?

Just like the Sharpe ratio, a higher Sortino ratio result is better. When looking at two similar investments, a rational investor would prefer the one with the higher Sortino ratio because it means that the investment is earning more return per unit of the bad risk that it takes on.

Which is better Sharpe or Treynor?

Comparing Treynor Measure and Sharpe Measure While Sharpe ratio is applicable to all portfolios, Treynor is applicable to well-diversified portfolios. While Sharpe is used to measure historical performance, Treynor is a more forward-looking performance measure.