|A risk-adjusted performance measure that represents the average return on a portfolio or investment, above or below that predicted by the capital asset pricing model (CAPM), given the portfolio's or investment's beta and the average market return.
|Beta attempts to measure relative risk. A Beta rating above 1.0 indicates greater volatility than the market. A Beta rating below 1.0 indicates lower volatility than the market.
|A call option is a contract between a buyer and a seller to purchase a certain stock at a certain price up until a defined expiration date. The buyer of a call has the right, not the obligation, to exercise the call and purchase the stocks.
|A measurement of an option's price sensitivity to a given change in the price of an underlying asset.
|A diagonal spread is a modified calendar spread involving different strike prices. It is an options strategy established by simultaneously entering into a long and short position in two options of the same type—two call options or two put options—but with different strike prices and different expiration dates.
|A valuation metric for equities. EV includes in its calculation the market capitalization of a company but also short-term and long-term debt as well as any cash on the company's balance sheet. This is then divided by the revenue in the most recent year.
|A non-directional option strategy, whereby an option trader combines a Bull Put spread and Bear Call spread to generate profit. In this strategy, there is a high probability of limited gain. An option trader resorts to this strategy if he believes that the market is going to be rangebound.
|The measurement of the total dollar market value of all of a company’s outstanding shares.
|MSCI All-Country World Index (ACWI)®
|A free-float weighted equity index. It captures Large and Mid-Capitalization representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. It is not possible to invest directly in an index.
|An agreement between two parties to facilitate a potential transaction involving an asset at a preset price and date. Call options can be purchased as a leveraged bet on the appreciation of an asset, while put options are purchased to profit from price declines.
|A measure of the market’s expectations of a firm’s future financial health. Because this measure deals with cash flows, the effects of depreciation and other non-cash factors are removed.
|A ratio used to compare a stock market value to its book value. It is calculated by dividing the current closing price by the latest quarter’s book value per share.
|A valuation metric for equities. It is calculated by dividing the company’s market cap by the revenue in the most recent year; or, equivalently, divide the per-share stock price by the per-share revenue.
|A put option gives you the right, but not the obligation, to sell a stock at a specific price (known as the strike price) by a specific time – at the option's expiration. For this right, the put buyer pays the seller a sum of money called a premium.
|The theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
|A statistical measure that represents the proportion of the variance for a dependent variable that's explained by an independent variable or variables in a regression model. It can also by computed by squaring the correlation between the strategy and the benchmark.
|Return on Equity
|The amount of net income returned as a percentage of shareholders‘ equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. Return on Equity = Net Income/Shareholders’ Equity
|A measure of risk adjusted performance that is often compared to a benchmark. The formula is the annualized return divided by the annualized standard deviation.
|Russell 2000® Index
|Consists of the smallest 2,000 companies in a group of 3,000 U.S. companies in the Russell 3000® Index, as ranked by market capitalization. It is not possible to invest directly in an index.
|Widely regarded as the best single gauge of large cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. It is not possible to invest directly in an index.
|The Sharpe ratio compares the return of an investment with its risk. It's a mathematical expression of the insight that excess returns over a period of time may signify more volatility and risk, rather than investing skill.
|A statistical measurement showing how widely returns varied over a certain period of time. For the characteristics, the period is twelve months. For the chart the period is since inception. When a fund has a high standard deviation, the predicted range of performance implies greater volatility.
|The annualized standard deviation of the excess returns of a strategy and its benchmark. It is a measure of how closely a strategy is performing relative to its benchmark.