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

Alpha is the return that a portfolio generates above and beyond market fluctuations. My portfolio’s alpha is 1.21, which means that my portfolio outperformed its benchmark index in terms of return over the period examined. It could mean there’s potential for even more outperformance, if the portfolio is managed properly.

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 high beta index means that the portfolio will be more volatile in comparison to its benchmark. A beta of 0.98 indicates that my portfolio has low volatility compared to the benchmark, and may therefore provide steady returns in time, even if markets are volatile.

The Sharpe ratio is a measure of the excess return generated by an investment per unit risk (measured using standard deviation). The Sharpe ratio helps determine if an investment is worthwhile given the level of risk. Higher Sharpe values indicate better performance per unit risk. The Sharpe ratio for my portfolio was 1.19, which indicates that I made the best use of investments in terms of achieving good returns while not having to put on excessive risk.