BacktestFolio · Glossary
Alpha
In plain language
If the portfolio gains 12% and the model based on its Beta would have predicted 8%, the Alpha is +4%. A positive Alpha means you outperformed more than the risk taken justified — it is the 'true' value added by the strategy.
Technical definition
Risk-adjusted return relative to the benchmark, accounting for systematic risk (Beta). Measures the value added (positive) or destroyed (negative) by the strategy beyond what its Beta would predict. Often expressed as Jensen's Alpha.