Risk Measures
Contents
Unraveling the Complexity of Risk Measures in Investment: A Comprehensive Guide
Deciphering Risk Measures
Explore the realm of risk measures, essential statistical tools used in investment analysis to gauge risk and volatility. Delve into the foundational role of risk measures in modern portfolio theory (MPT) and their significance in evaluating investment performance.
Understanding the Five Principal Risk Measures
Alpha
Understand how alpha measures the risk relative to a market or benchmark index, providing insights into a fund's performance compared to its designated benchmark.
Beta
Gain insights into beta, a measure of volatility or systemic risk, indicating how a fund's movements align with or deviate from the movements of the market or benchmark index.
R-Squared
Explore the concept of R-squared, which quantifies the percentage of an investment's movement attributable to movements in its benchmark index, aiding in assessing correlation.
Standard Deviation
Learn about standard deviation, a vital metric for measuring data dispersion and providing insights into an investment's volatility and deviation from expected returns.
Sharpe Ratio
Discover the Sharpe ratio, a key measure of risk-adjusted performance, enabling investors to assess whether the return on investment is attributable to wise investing or excessive risk assumption.
Benchmark Indices and Their Significance
Understand the role of benchmark indices such as the S&P 500 Index and U.S. Treasury Bill in investment analysis and risk assessment.