Alpha

Alpha is a measure of an investment's performance compared to a benchmark index, such as the S&P 500. It represents the excess return of an investment relative to the return of the benchmark.

A positive alpha indicates that the investment has outperformed its benchmark, while a negative alpha suggests underperformance. Alpha is one of five key risk ratios used in portfolio management, along with beta, standard deviation, R-squared, and the Sharpe ratio.

For example, if a fund has an alpha of 1.0, it has outperformed its benchmark index by 1%. Conversely, an alpha of -1.0 would indicate underperformance of 1%.