Alpha measures performance, and beta measures volatility, and used independently or in conjunction, they provide a way of evaluating risk and reward. The statistical measures “alpha” and “beta” can help you to understand the characteristics of an asset.

You don’t need to learn the Greek alphabet to invest in the stock market, but understanding the terms alpha and beta will help you to understand the risk ratio associated with every trade.

We will be looking at what alpha and beta are, how they are calculated, and the value of this knowledge in developing your investment strategy. We’ll also explore how a third metric, Capital Asset Pricing Model (CAPM), incorporates the concepts of alpha and beta into one…