Understanding Portable Alpha Strategy: Boost Portfolio Returns
Key Takeaways
- Portable alpha targets higher returns by investing in assets that have little to no correlation with market indexes.
- Alpha is the excess return on an asset compared to a benchmark, while beta measures its market correlation.
- Investors can use portable alpha by balancing between large-cap stocks for beta and small-cap stocks for alpha.
- The goal of portable alpha is to boost returns without increasing the portfolio’s overall risk or beta.
- Portfolio managers replicate the beta of an index and add high-alpha securities for potentially greater returns.
What Is the Portable Alpha Strategy?
Portable alpha is a strategy designed to add alpha returns without risking the overall beta of a portfolio. It calls for investing some…
