Instead of using the purchase price and current value of onestock, investors will calculate based on the total value of the portfolio. For example, on June 1st, a portfolio is valued at $14,500. After a week of market activity, the portfolio value increases to $15,225 on June 8th. The...
Formula to Calculate Alpha of a Portfolio Alpha is an index that is used for determining the highest possible return concerning the least amount of risk, and according to the formula, alpha is calculated by subtracting the risk-free rate of the return from the market return and multiplying the...
The liquidation value of a company represents the total value of its assets if the company were to go out of business and liquidate its assets to pay off debts. For investors, understanding a company's liquidation value can provide insights into its financial health and potential risk level. I...
This article describes two methods of calculating the return of a portfolio. The first method is a sum of the individual parts. The second method uses an approximation equation that compares the total market value of all holdings at the end of the period to the total market value of all ...
Calculate the beta of your investments when evaluating the risk-to-reward potential of your portfolio. For example, when your portfolio contains overweighted positions of any security, your calculation should reflect the overweighting. A security assuming 40 percent of portfolio value is not the same...
Using Risk Adjusted Returns Investors can measure the performance of their portfolio by comparing their risk adjusted return to the return for the benchmark for their fund or investment. Having investments with lower risk in a strong market can limit returns. On the other hand, having higher risk...
You can calculate your portfolio’s volatility of returns in a precise way using a portfolio volatility formula that computes the variance of each stock in the collection and the covariance of each pair. A simplified approach is to use the standard devia
For example, thefinancial leverage formulameasures the impact of loans, bonds and other debts you carry on your profitability. There are several ways to calculate this depending on the aspect of your finances about which you're worried.
You don’t have to rebalance, of course. The more heavily your portfolio becomes weighted toward stocks, the higher your long-term returns will probably be. But they won’t be that much higher than if you had a more balanced asset allocation and the additionalvolatilitymight cause you to ma...
The difference between the total risk of holding individual securities and the portfolio risk is always substantial and is used to explain the benefits of diversification. Calculations for a portfolio with a large number of stocks can complicate your analysis. In this case, it is suggested to use...