Alpha vs. Beta Alpha vs. beta. Before getting into the formulas, consider the following scenario: You invest in a fund manager who tends to buy many stocks that can be volatile against the market ...

For example, a U.S. stock with a beta of 1.5 has historically been 50 percent more volatile than the S&P 500. Alpha The mathematical formula for calculating alpha is the following: ...

Alpha and beta are two different parts of an equation used to explain the performance of stocks and investment funds. Beta is a measure of volatility relative to a benchmark, such as the S&P 500.

Alpha = 0.018 or 1.8%. The mutual fund outperformed its benchmark index by 1.8%, so it has an alpha of 1.8. How Does Alpha Work with Beta? What Is Considered “Good” Alpha?

The chart below provides a good comparative example of alpha, or "excess returns." Investors can use both alpha and beta to judge a manager's performance. Table 1 ...

For example, if a fund has a beta of 1.2, it means that when the market moves up or down by 1%, the fund is likely to move up or down by 1.2%. Beta helps investors understand the level of risk ...