Jensen's Alpha Calculator

Measure investment performance with Jensen's alpha Calculator - a powerful tool for assessing risk-adjusted returns. Analyze your portfolio's performance with ease!

Result Jensens Alpha 0%

Related Calculators: Sharpe Ratio, Sortino Ratio, Treynor Ratio, Information Ratio, /calc/maximum-drawdown/

Jensen's Alpha Formula

Jensen's alpha is a widely used metric in finance to evaluate the risk-adjusted returns of an investment portfolio. It measures the excess return generated by a portfolio over the theoretical return predicted by the Capital Asset Pricing Model (CAPM).

The formula to calculate Jensen's alpha is:

Alpha = Portfolio Return - (Risk-Free Rate + Beta * (Market Return - Risk-Free Rate))

Where:

Alpha: Represents the excess return of the portfolio.
Portfolio Return: The actual return achieved by the portfolio.
Risk-Free Rate: The rate of return on a risk-free investment, such as a government bond.
Beta: Measures the sensitivity of the portfolio's returns to the overall market returns.
Market Return: The average return of the market.

By calculating Jensen's alpha, investors can assess whether a portfolio has outperformed or underperformed the market, considering the systematic risk associated with the investment.