Alpha, Beta, Sharpe Ratio and R-Square of Mutual Funds

While comparing mutual funds, the first aspect that you need to check if the mutual fund is suitable as per your risk profile. To do this you need to look at the mutual funds’s risk rating and compare it with your risk profile. You need to first ensure that the shortlisted schemes suit your risk profile. Doing this at the start will help you compare the right mutual fund schemes. There are parameters that distinguish one mutual fund scheme from another. By using these parameters you can compare mutual fund schemes and arrive at the one that’s best suited for your risk profile and aligns with your investment goals.

We're discussing standard values of these parameter in straight way. Know more about Alpha, Beta, Sharpe Ratio and R-Square on Upstox.

Alpha: Denotes fund manager’s achievement of outperforming the benchmark index.
>0 Outperformance, =0 Performance precisely in line with the index, <0 Underperformance

Beta: Response to market index volatility. Higher beta, higher return, higher risk.
>1 More variation, =1 Same variation, <1 Less variation

Sharpe Ratio: Risk-adjusted return of an investment. Higher the Sharpe ratio, the more attractive the risk-adjusted return.
>3 Highest, 2.99 - 2 Higher, 1.99 - 1 High, <1 Low

R-Square: Percentage of funds matching benchmark index.
0 Not matching, 1 Fully matching.