Tracking Error
What Does Tracking Error Mean?
A divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark. This is often in the context of a hedge or mutual fund that did not work as effectively as intended, creating an unexpected profit or loss instead.
Investopedia explains Tracking Error
Tracking errors are reported as a "standard deviation percentage" difference. This measure reports the difference between the return you received and that of the benchmark you were trying to imitate.
