R-Squared
Definition of 'R-Squared'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 fixed-income securities, the benchmark is the T-bill. For equities, the benchmark is the S&P 500. |
|
Investopedia explains 'R-Squared'R-squared values range from 0 to 100. An R-squared of 100 means that all movements of a security are completely explained by movements in the index. A high R-squared (between 85 and 100) indicates the fund's performance patterns have been in line with the index. A fund with a low R-squared (70 or less) doesn't act much like the index.A higher R-squared value will indicate a more useful beta figure. For example, if a fund has an R-squared value of close to 100 but has a beta below 1, it is most likely offering higher risk-adjusted returns. A low R-squared means you should ignore the beta. |
|
Related Definitions
Articles Of Interest
-
The Uses And Limits Of Volatility
Check out how the assumptions of theoretical risk models compare to actual market performance. -
R-Squared
Learn more about this statistical measurement used to represent movement between a security and its benchmark. -
Beta: Gauging Price Fluctuations
Learn how to properly use this measure that can help you meet your criteria for risk. -
Beta: Know The Risk
Beta says something about price risk, but how much does it say about fundamental risk factors? Find out here. -
Volatility - The Birth Of A New Asset Class
Learn more about the trading possibilities with the VIX. -
Bettering Your Portfolio With Alpha And Beta
Increase your returns by creating the right balance of both these risk measures. -
Understanding Volatility Measurements
How do you choose a fund with an optimal risk-reward combination? We teach you about standard deviation, beta and more! -
The Volatility Index: Reading Market Sentiment
Using the Volatility Index can be essential for investing success. -
Calculating Beta: Portfolio Math For The Average Investor
Beta is a useful tool for calculating risk, but the formulas provided online aren't specific to you. Learn how to make your own. -
The Linear Regression Of Time and Price
This investment strategy can help investors be successful by identifying price trends while eliminating human bias.
Free Annual Reports