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Alpha calculator

Jensen's alpha measures how much a portfolio earned above (or below) what its risk would predict. Positive alpha means it beat the market on a risk-adjusted basis.

How it works Report a problem

Alpha calculator

Enter your values below and press Calculate to see your result instantly.

1.0 is market risk | < 1.0 is defensive | > 1.0 is aggressive
The Alpha (α)
3.6%
EXPECTED RETURN (CAPM)
11.4%
OUTLOGIC SCORE
Elite
Your portfolio delivered 3.6% more than the market indicated for your level of risk.

Alpha answers the question raw returns cannot: did this investment actually earn more than it should have, given the risk it carried? It compares the real return against the return predicted by the capital asset pricing model (CAPM), and reports the difference.

How to use this calculator

  • Enter the portfolio's actual return.
  • Enter the risk-free rate, the market return and the portfolio's beta.
  • Press calculate to see the alpha (positive means outperformance after adjusting for risk).

A positive alpha is a claim, not a trophy

One good year produces a positive alpha by luck as easily as by skill; the measure only starts to mean something across long periods and full market cycles. Fees quietly erode it too, since the alpha investors keep is the one left after costs, which benchmark comparisons often forget to subtract.

Frequently asked questions

What is the alpha formula?
Alpha = actual return − [risk-free rate + beta × (market return − risk-free rate)]. The bracketed part is the CAPM expected return.
What does an alpha of 2 mean?
The investment returned 2 percentage points more than expected for its level of market risk over that period. An alpha of −2 means it fell 2 points short.
What is a good alpha?
Any sustainably positive alpha after fees is rare and valuable; most active funds deliver zero or negative alpha over long horizons. Short-period alphas should be read with suspicion.