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Centrino Capital

Alpha Definition

Alpha measures how an investment performs compared to a reference market index.

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What is Alpha?

Alpha indicates how much value an investment or portfolio manager adds beyond market returns. Positive alpha shows value added beyond the benchmark, while negative alpha shows value lost.

Alpha is commonly used to evaluate active investment strategies.

Understanding alpha helps investors assess risk-adjusted performance.

Example of Alpha

If a portfolio returns 12% while its benchmark returns 10%, the alpha is 2%.

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