Alpha is a measure of risk-adjusted returns for a given stock or portfolio. It is used as a figure used to measure a strategy's ability to "beat" the market. Alpha is used in conjunction with Beta, which measures the market's overall volatility or risk, known as systematic market risk. Excess returns of an investment, relative to the returns of its assigned benchmark will be the investment's alpha. This is shown as a single percentage and can be positive or negative.

A positive alpha indicates a better return relative to how the benchmark performed, a lower alpha means the investment performed worse than it should, given the return of its benchmark. In financial theory, there are two components of an expected return for a stock. One is the return that is expected based on movements in the overall market, meaning if the market as a whole goes up, the price of a stock is also expected to rise. The second component is an increase in the price of the stock not explained by the market's movement. This component is a stock's alpha.

The following is a table of the benchmark indices used for specific asset classes:

Asset Class Benchmark Index Symbol
US Equity S&P 500 Total Return ^SPXTR
International Equity MSCI ACWI ex USA Net Total Return ^MSACXUSNTR
Municipal Bond Bloomberg Municipal Bond Total Return ^BBMBTR
Allocation S&P 500 Total Return ^SPXTR
Taxable Bond Bloomberg US Aggregate Total Return ^BBUSATR
Commodities Bloomberg Commodity Index Total Return ^BCTR
Money Market Bloomberg US Treasury Bills 1-3 Month Total Return ^BBUTB13MTR
Sector Equity MSCI World Net Total Return ^MSWNTR
Alternative MSCI ACWI Net Total Return ^MSACWINTR
Canadian Equities S&P/TSX 60 Index Total Return ^SPTSX60TR
Canadian Fixed Income Bloomberg Global Aggregate CAD Hedged ^BBGATRCADH


Alpha = Annualized security return - risk free rate - beta * (annualized benchmark return - risk free rate) * 100

Risk free rate = average 1 month treasury rate throughout the lookback period. I.e. 5 year alpha will use the average 1 month treasury rate for the last 5 years