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Hi, everyone, and welcoming this new with you.
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In this video, we're going to talk about another CPA metrics, which is the alpha, the alpha of a
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stock, a portfolio or strategy is the statistic that indicates whether the portfolio outperformed the
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market in terms of risk return in the equation of the alpha.
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You find it a risk free assets, however.
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Actually, the risk free asset is very close to zero, even sometimes negative.
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So it's better to don't take into account this variable because it's just complex ify the equation without
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any benefits.
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So there are two cases when you have compute the alpha, the first, the alpha is below.
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Zero.
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It means that the portfolio underperforms the markets in terms of risk return.
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And if the alpha is above zero, the portfolio outperform the market in terms of risk return.
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So now we're going to compute the alpha of Google to do it.
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We need the mean variable that we have created before.
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Then we're going to multiply it by one minus beta.
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And we need to multiply it by two hundred fifty two because we need to annualize the mean because all
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metrics when you do a testing must be annualized.
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And then we can print
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the alpha of Google.
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In percentage, because usually we use.
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The alpha in percentage, because it is way in which propulsion of portfolio outperformed or underperformed
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the market.
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So we have an offer of zero point nine percent, so around one person.
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So it means that in terms of risk, which on Google, stock price is one percent better than the index
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S&P 500.
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