Alpha
The return earned beyond what the portfolio's market risk explains: what is left after subtracting beta multiplied by the market's own move.
Formula
Computed over matching periods: the portfolio return less the return the market would have delivered at that beta. The result is a fraction for the period, not annualised.
How to read the number
The number depends on the chosen benchmark: against one index the portfolio shows a surplus, against another a shortfall, while the trades were identical.
When the metric lies
Also known as: jensen alpha