Alpha
Definition
A measure of an investment’s performance relative to a benchmark index, representing the excess return generated by a manager’s skill rather than market movement. Positive alpha indicates outperformance.
Formula / Rules
$ \alpha = R_p - [R_f + \beta (R_m - R_f)] $ (where $ R_p $ = portfolio return, $ R_f $ = risk-free rate, $ \beta $ = beta, $ R_m $ = market return)
Example
A fund with 12% return when the benchmark returned 8% (after adjusting for risk) has +4% alpha. Beta Category: Equity / Risk Metric Definition: A measure of a stock’s volatility relative to the overall market. Beta of 1.0 moves with the market; >1.0 i
Related Terms
Frequently Asked Question
What is Alpha in trading?
A measure of an investment’s performance relative to a benchmark index, representing the excess return generated by a manager’s skill rather than market movement. Positive alpha indicates outperformance.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.