DEFINITION of 'RSquared'
A statistical measure that represents the percentage of a fund or security's movements that can be explained by movements in a benchmark index. For fixedincome securities, the benchmark is the Tbill. For equities, the benchmark is the S&P 500.
INVESTOPEDIA EXPLAINS 'RSquared'
Rsquared values range from 0 to 100. An Rsquared of 100 means that all movements of a security are completely explained by movements in the index. A high Rsquared (between 85 and 100) indicates the fund's performance patterns have been in line with the index. A fund with a low Rsquared (70 or less) doesn't act much like the index.
A higher Rsquared value will indicate a more useful beta figure. For example, if a fund has an Rsquared value of close to 100 but has a beta below 1, it is most likely offering higher riskadjusted returns. A low Rsquared means you should ignore the beta.
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What's the relationship between r squared and beta?
Beta and Rsquared are two related, but different measures. A mutual fund with a high Rsquared correlates highly with a ... Read Full Answer >> 
Where do funds report their rsquared?
Some mutual fund companies report the Rsquared of established funds in advertising literature, while others do not. Yahoo! ... Read Full Answer >> 
What's the difference between rsquared and adjusted rsquared?
One major difference between Rsquared and the adjusted Rsquared is that Rsquared supposes that every independent variable ... Read Full Answer >> 
What's the difference between rsquared and correlation?
Rsquared is a statistical analysis of the practical use and trustworthiness of beta (and by extension alpha) correlations ... Read Full Answer >>

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