Discuss your alpha, beta and Sharpe measures for your portfolio and what they mean about how your portfolio performed.

Two-page written reports should be submitted in the provided blackboard box

Alpha refers to the return that a portfolio generates above and beyond market movements. My portfolio’s alpha score was 1.21, which means that it has outperformed its benchmark index in terms of return over the period under study. If managed properly, this could indicate that the potential exists for more outperformance.

Beta measures the volatility or risk associated with a portfolio relative to a benchmark index such as the S&P 500. Beta is a measure of volatility. A beta higher than its benchmark indicates that it is more volatile, and a beta lower means that its benchmark is less volatile. The beta for my portfolio was 0.98, which indicates that it is less volatile than its benchmark. This suggests that the portfolio may be able to provide stable returns over time, even in turbulent markets.

A Sharpe ratio is a measure of the amount of excess return an investment can generate per unit risk (measured as a standard deviation). Investors use Sharpe ratios to determine whether or not an investment is worthwhile given the level of risk. Higher Sharpe ratios indicate better performance per unit of risk. The Sharpe ratio in my portfolio was 1.19. This means that it has been well utilized with regard to achieving returns while not having to take too much risk. It is advantageous relative to other investments at the same level and fees.

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