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What is the difference between alpha and beta?

Alpha and beta are two different parts of an equation used to explain the performance of stocks and investment funds. Beta is a measure of volatility relative to a benchmark, such as the S&P 500. Alpha is the excess return on an investment after adjusting for market-related volatility and random fluctuations.

What is alpha & beta?

Alpha and beta are two of the key measurements used to evaluate the performance of a stock, a fund, or an investment portfolio. Alpha measures the amount that the investment has returned in comparison to the market index or other broad benchmark that it is compared against. Beta measures the relative volatility of an investment.

Why do investors use alpha & beta?

Investors use alpha to identify investments that have consistently outperformed their expected returns, adjusting for risk. Alpha and beta are fundamental concepts in finance that help investors measure and understand the performance and risk of investments relative to the broader market.

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