Alpha Beta Calculator

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

  1. Beta = Covariance (Portfolio, Market) ÷ Variance (Market)
    This tells how your portfolio moves compared to the market.
  2. Expected Return = Risk-Free Rate + Beta × (Market Return − Risk-Free Rate)
    This is from the CAPM model.
  3. 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() or VAR.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!

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