R-Squared (R²)
Definition
A statistical measure (0 to 100%) indicating what percentage of a portfolio's or stock's price movement is explained by the benchmark index. High R² means returns closely track the index.
Formula / Rules
R² = 1 − (SS_res / SS_tot)
Example
An S&P 500 index fund has R² near 100%; an alternative strategy fund may have R² below 30%, indicating low index correlation.
Related Terms
Frequently Asked Question
What is R-Squared (R²) in investing?
R-squared measures how much of an asset's movement is explained by a benchmark. High R² = beta-driven returns; low R² = manager or strategy adds differentiated exposure.
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.