What is the ratio of the rating?
The ratio of evaluation is the method of evaluation of the performance of the investment fund administrator. It is not only measuring how high the return has achieved, but it puts it in the context of how risky the investment was. This means that the high ratio of evaluation is often considered to be a sign of skills than happiness. Someone who reaches a very high return could simply risk and was lucky and the same fund manager could have come across and burn in the future. Although the previous performance is not a guarantee of future results, the ingenious investors will want to get a better idea of how skillful the fund manager was in the past. The aim of the assessment is to solve this problem taking into account how volatile the markets were, and thus how much potential was for fund managers to make profits simply by making happiness.
The ratio of the evaluation ratio, the alpha fund is divided by the unsystematic risk of the funds in which they have invested. The alpha calculation is a complicated process. Its technical definition is to capture safetyThe characteristic line that line is comparing the graph of the asset risk for the risk of the relevant market. It is easier to understand Alpha by looking at what it actually represents.
Alfa takes into account how much fluctuations were included in the price of a specific assets and how compared to fluctuations in the base market. The idea is that the asset that fluctuated more in value is more risky, and therefore more susceptible to happiness than skill. The alpha itself is a character showing the return on the asset after adjustment for this comparative risk.
Nesystem risk, otherwise known as a non -systemic risk, measure how much fluctuation was selected in the assets of the funds compared to the fluctuation of the whole market. Thus, the non -systemic risk involves problems that relate to these specific actions, not overall market movements. The theory is such that a non -systemic risk can be reduced by diversification or investoVat into a wider range of companies.
Therefore,the creation of an evaluation ratio by means of these two measures serves two purposes. First, its goal is to find out how much success the fund manager was more of a skill than happiness. Secondly, it adds that with sufficient diversification happiness becomes less important and the fund's own skill becomes more significant.