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 >> 
What are the primary sources of market risk?
Market risk is the risk of loss due to the factors that affect an entire market or asset class. Market risk is also known ... Read Full Answer >> 
How does beta measure a stock's market risk?
Beta is a statistical measure of the volatility of a stock versus the overall market. It's generally used as both a measure ... Read Full Answer >>

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