Alpha (Alpha part of a ratio)

Alpha, in investment terms, measures how much a fund or portfolio's returns exceed or fall short of its expected performance based on market movements. It represents the value added by the manager's skill, beyond what chance or the overall market accounts for. A positive alpha indicates the portfolio outperformed its benchmark, while a negative alpha suggests underperformance. For example, an alpha of 2 means the investment gained 2% more than expected given the market’s rise, highlighting the manager’s ability to generate extra returns through selection or timing.