Alpha & Beta Calculator
Alpha: 0%
Beta: 0
Alpha Beta Calculator: Measure Investment Performance and Risk
If you’re an investor, trader, or finance student, understanding Alpha and Beta is essential. These two metrics help you evaluate how a stock or portfolio is performing compared to the market — and whether it’s taking on too much risk to do so. This page offers a simple, easy-to-use Alpha Beta Calculator to help you assess both.
What is Alpha?
Alpha measures the excess return of an investment compared to a market benchmark (like Nifty 50 or S&P 500).
- Positive Alpha: Investment outperformed the market.
- Negative Alpha: Investment underperformed.
- Zero Alpha: Performed exactly as expected.
It is usually expressed as a percentage. For example, an Alpha of +2% means your investment beat the market by 2%.
What is Beta?
Beta measures the volatility or risk of an investment compared to the market.
- Beta > 1: More volatile than the market (higher risk, higher return).
- Beta < 1: Less volatile than the market.
- Beta = 1: Moves with the market.
Understanding Beta helps you know whether you’re taking too much or too little risk compared to the market.
Formulas Used
- Beta = Covariance (Portfolio, Market) ÷ Variance (Market)
This tells how your portfolio moves compared to the market. - Expected Return = Risk-Free Rate + Beta × (Market Return − Risk-Free Rate)
This is from the CAPM model. - Alpha = Portfolio Return − Expected Return
Alpha tells if you’re outperforming the expected return.
Calculator Inputs Explained
To use the calculator, just fill in these:
- Portfolio Return (%): The actual return your stock or mutual fund gave over a year.
- Risk-Free Rate (%): Return from a safe investment, like a 10-year government bond or anything else but safe return you get.
- Market Return (%): The average annual return of the overall stock market.
- Covariance (Portfolio & Market): How your portfolio moves with the market.
(You can get this from Excel or portfolio analysis tools.) - Market Variance: Statistical variance of the market returns.
(Also can be calculated using Excel or data tools.)
Covariance (Portfolio & Market)
What it means:
Covariance tells us how your portfolio and the market move together.
- If both move up or down together, covariance is positive.
- If your portfolio moves opposite to the market, it’s negative.
- A higher positive value means stronger connection with the market.
Why it matters:
It helps us understand if your portfolio is following market trends or behaving differently.
How to get it:
You can calculate it using:
- Excel’s COVARIANCE.P function
(You need daily/weekly return data of both your portfolio and market index like Nifty or S&P 500.) - Online tools like Portfolio Visualizer, Yahoo Finance + Excel, or screener-based APIs.
Market Variance
What it means:
Variance shows how much the market’s returns fluctuate (up or down) over time.
- High variance = Market is very volatile (more risk).
- Low variance = Market is more stable (less risk).
Why it matters:
You divide covariance by market variance to get Beta, which shows your portfolio’s risk level compared to the market.
How to get it:
- In Excel, use
VAR.P()
orVAR.S()
on the market return data (daily, weekly, or monthly). - Or use tools like Yahoo Finance, Python scripts, or financial APIs to calculate it.
Simple Analogy:
- Think of covariance like a dance — if the portfolio and market move in sync, they have high positive covariance.
- Variance is like how fast and wild the market is dancing — more variance means more unpredictable steps!
Outputs You Will See
After clicking “Calculate”, you’ll see:
- ✅ Alpha (%): Shows how much extra return your investment gave over what was expected.
- ✅ Beta: Shows the risk level — how much your investment fluctuates compared to the market.
- ✅ Beta Interpretation: Simple explanation of what the beta means.
Tips & Tricks
- Use at least 1-year data for accurate covariance and variance.
- Beta > 1 → High volatility (risky).
Beta < 1 → Lower risk. - Positive Alpha means you’re doing better than expected.
Negative Alpha means you’re underperforming. - If unsure how to get covariance/variance, use tools like Excel, Portfolio Visualizer, or data APIs.
Start using this calculator to make smarter investment decisions!