Stock Market

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What is Alpha & Beta in Stock Market?

Investment whether short term or long term will come with two important aspects inherent in it. They are the returns and the risk. When you invest in any kind of investment there is always the risk element that is not avoidable. The same is applicable to stock investment as well. However the level of risk is something that you could to some extent make a choice. If you are ready to take up higher risk then you may invest in such shares that are highly volatile. It's not necessary that if you take up higher risk that will guarantee higher returns. So the next factor that anybody consider while investing in any kind of shares are the returns. Returns in the form of dividend or price increase to fetch higher profits are something any investor will look for.

Alpha:

The Alpha is nothing but refers to all those parameters that in a way affect the stock and its performance. Based on this the investor will decide about his investment patterns. In simple terms Alpha is defined as the return on an investment after the adjustment of the risk associated with it. Every stock will have a benchmark and if you get anything in return which exceed this mark then that is termed as the Alpha. So this is mainly used by the investors in order to track the performance of their portfolio. If a security has a good alpha then the investor will preferably invest in them.

Beta:

The beta of stocks is nothing but the market risks that will affect the stock in several ways. This will measure the stock volatility. Every stock and its price movement are studied in relation to the total price fluctuation of the market under the Beta. The beta will have either positive or negative values.