# Beta

• Sensitivity of the return of the asset to the market return is known as Beta
• Beta is calculated as follows:-

Portfolio Beta

• Beta can also be calculated for portfolio
• Portfolio Beta is the weighted average of the betas of individual assets in the portfolio

Sharpe ratio
Sharpe ratio:

Rp = portfolio return, Rf = risk free return

The higher the Sharpe measure, the better the portfolio

Treynor ratio
Treynor ratio:

Rp = portfolio return, Rf = risk free return

The higher the Treynor measure, the better the portfolio

However, this measure should be used only for well-diversified portfolio

Jensonâ€™s alpha:

Jensonâ€™s alpha:

Rp = portfolio return, Rc = return predicted by CAPM

Positive alpha (portfolio with positive excess return) is always preferred over negative alpha