Alpha Definition

Definition: It refers to an estimated numeric value of a stock’s expected excess return that cannot be attributed to the market’s volatility, but may be due to some other security. That is, the excess return of the investment relative to the return of the benchmark index is a investment’s alpha.

Alpha is one of the technical ratios in modern portfolio theory. Others are beta, standart deviation, R-squared, and the Sharpe ratio. Alpha is always wanted to be positive and beta to be zero